Determine the capital balances of Arnold, Barry and Cardi

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Question - Arnold and Barry are partners whose profit & loss percentages are 60% and 40%, respectively. The book values of the partners' capital balances are P136,500 for Arnold and 91,000 for Barry. The partners have agreed to admit Cardi as a partner for a 25% interest in the firm and invested Cash of 43,750 and non cash assets having a book value of 150,000 with fair values of 113,750. The bonus method is used to record the admission of the new partner. Cardi will share 25% in profits and loss while the original partners will share in their original sharing ratio.

The original partners agreed to revalue their assets before the admission of Cardi. An analysis of their non-current assets revealed the following:

 

Carrying values

Fair values

Accounts Receivable

210,000

192,500

Inventories

350,000

420,000

Equipment

619,500

654,500

Required -

1. Determine the capital balances of Arnold, Barry and Cardi after the admission of Cardi?

2. Calculate the amount of Bonus?

Reference no: EM133073483

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