Admission of a New Partner

Purchase of Interest

a. Purchase from one partner

A, Capital
Z, Capital

b. Purchase from all partners

A, Capital
B, Capital
C, Capital
Z, Capital

ALTERNATIVE METHOD:
a. Implied Goodwill Method

Implied Value of the partnership

Book value of partnership
Undervaluation of identifiable assets or goodwill 0

Entries:

Identifiable assets or goodwill 0

A, Capital
B, Capital
C, Capital

A, Capital
B, Capital
C, Capital
Z, Capital

b. Bonus Method

A, Capital
B, Capital
C, Capital
Z, Capital
 Admission of a New Partner
New Partner Invests in Partnership

Agreed Capital = (Total Old Capital + Investment) x % of New Partner

CASE 1: Investment cost = Agreed Capital

Investment in partnership
Agreed Capital
Difference 0

Entry:
Cash
Z, Capital

CASE 2: Investment Cost > Agreed Capital Old partners

Investment in partnership
Agreed Capital
Difference 0

a. Revaluation of Assets Approach b. Goodwill Recognition

(1) Identifiable Assets Total agreed capital

A, Capital Total contributed capital
B, Capital Goodwill

(2) Cash Entry:

Z, Capital Goodwill
Cash
Total Capital of Old Partners A, Capital
Revaluation of asset B, Capital
New partner's investment Z, Capital
Total resulting capital of partnership 0

c. Bonus Method

Investment in partnership
Agreed Capital
Bonus to old partners 0

Entry:
 Cash
A, Capital
B, Capital
Z, Capital

CASE 3: Investment cost < Agreed Capital

Investment in partnership
Agreed Capital
Difference 0

a. Revaluation of Assets Approach b. Goodwill Recognition for New Partner

Entry: Total Resulting Capital

A, Capital Total net assets
B, Capital Goodwill
Asset
Entry:
Cash Cash
Z, Capital Goodwill
Z, Capital

c. Bonus Method

Investment in partnership
Agreed Capital
Bonus to new partner 0

Entry:
A, Capital
B, Capital
Cash
Z, Capital
 Withdrawal of a Partner

Case 2: Settlement more than withdrawing partner's interest

a. Partial Goodwil Method

Goodwill
A, Capital
Cash

b. Total Goodwill Method

Goodwill
A, Capital
B, Capital
Z, Capital
Cash

c. Bonus Method
A, Capital
B, Capital
Z, Capital
Cash

0 Case 3: Settlement less withdrawing partner's interest

a. Revaluation of Assets

A, Capital
Cash
Identifiable Asset

b. Bonus Method

A, Capital
Cash
B, Capital
Z, Capital
ew Partner

0
 Incorporation of a Partnership

CASE 1: Books of Partnership Retained

Entries in the book of the NEW CORPORATION

a. Revalue the assets and recognize goodwill

b. Record issuance of shares

A, Capital
B, Capital
Common stock
Additional Paid-in capital

CASE 2: New book opened

Entries in the book of the PARTNERSHIP Entries in the book of the NEW CORPORA
a. Revalue the assets and recognize goodwill a. Baliktarin mo lang yung sa letter b and n
amount na dapat ang PPE
b. Record the transfer of assets and liabilities
Assets
Stocks of corporation Goodwill
Liabilities Liabilities
Contra-assets Allowance for bad de
Assets Common stock
Goodwill Additional Paid-in cap

c. Record the distribution of stocks to the partners b. Record issuance of shares to other incorp

A, Capital Cash
B, Capital Common stock
Stocks of Corporation Additional paid-in cap
f the NEW CORPORATION
yung sa letter b and net
dapat ang PPE

Allowance for bad debts

Common stock
Additional Paid-in capital

f shares to other incorporators

Common stock
Additional paid-in capital
a. Total resulting capital (700,000 / 0.75) 933,333.33
Old partner's capital 700,000
Required cash investment of Liezel 233,333.33

b. Cash 250,000.00 Total resulting capital (7

Goodwill 50,000 Old partner's capital afte
Leah, Capital 20,000 Required cash investm
Liza, Capital 15,000
Linda, Capital 15,000
Liezel Capital 250,000.00

c. Cash 273,333.33 Total resulting capital (7

Leah, Capital 12,000 Old partner's capital
Liza, Capital 9,000 Required cash investm
Linda, Capital 9,000
Liezel Capital 243,333.33

d. Cash 213,333.00 Total resulting capital (7

Goodwill 20,000 Old partner's capital
Liezel, Capital 233,333 Required capital credit
Goodwill to Liezel
Required cash investm

e. Total resulting capital 900,000 Investment Cost

Old Partners' Capital 700,000 Agreed Capital (700,000
Required cash investment 200,000 Difference

Cash 200,000
Leah, Capital 10,000
Liza, Capital 7,500
Linda, Capital 7,500
Liezel Capital 225,000
Total resulting capital (750,000 / 0.75) 1,000,000.00
Old partner's capital after goodwill (700,000 + 750,000
Required cash investment of Liezel 250,000.00

Total resulting capital (700,000+30,000)/0.75 973,333.33

Old partner's capital 700,000
Required cash investment 273,333.33

Total resulting capital (700,000 x 0.75) 933,333.33

Old partner's capital 700,000
Required capital credit 233,333.33
Goodwill to Liezel 20,000
Required cash investment of Liezel 213,333.33

Investment Cost 200,000.00

Agreed Capital (700,000+200,000) x 25% 225,000
Difference -25,000.00