Reference no: EM132531311

Question 1 - Castro and Falceso are partners who share profits and losses in a ratio of 2:3, respectively, and have the following capital balances on Sept. 30,2019: Castro, Capital, $100,000 Cr and Falceso, Capital, $150,000 Cr. The partners agreed to admit Garachico to the partnership.

Required - Calculate the capital balances of each partner after the admission of Garachico, assuming that bonuses are recorded when appropriate for each of the following assumptions:

1. Garachico paid Castro $50,000 for 40% of his interest.

2. Garachico invested $50,000 for a one-sixth interest in the partnership.

3. Garachico invested $50,000 for a 25% interest in the partnership.

4. Garachico invested $50,000 for a 15% interest in the partnership.

Question 2 - Magdaraog and Mercado are partners in Magaraog and Mercado Partnership with capital balances of $550,000 and $350,000 respectively; they share income and loss in the ratio 1:3, respectively. The partners are considering the admission of San Pedro.

Required - Prepare the entries to record the admission of San Pedro under each of the following independent situations:

1. San Pedro invested $100,000 cash in the partnership for a one-tenth interest. The net assets of the partnership are fairly valued.

2. San Pedro invested $140,000 cash in the partnership for a one-eight interest. Assets of the partnership are fairly valued except for equipment, which is undervalued by $80,000. Net assets of the partnership are to be revalued and San Pedro is to be admitted.

3. San Pedro is to receive a one-tenth interest in the partnership upon investing $180,000 cash. Net assets of the partnership are fairly valued. San Pedro is to be admitted using the bonus method.

4. San Pedro is to receive a 20% interest in the partnership upon investing $200,000 cash. Net assets of the partnership are fairly valued. San Pedro is to be admitted using the bonus method.