Reference no: EM132621552

Assume that after operations and partners' withdrawals during 2018 and 2019. DE Partnerships has a book value of P 120,000 and a profit and loss percentage on January 1, 2020 as follows:

      Capital Balances            P and L %

D        P 72,000                      70%

E           48,000                      30%

Total       P 120,000               100%

On this date, F is admitted to the partnership.

Required:

Problem 1. Prepare journal entries to record the admission of F, assuming:

a. Purchase of interest from one partner. F paid P 28,800 directly to D in exchange for 1/3 interest.

b. Purchase of interest from all partners. This situation gives rise to three assumptions:

1. Purchase at book value. F purchases a ¼ interest in the firm. One- fourth of each partner's capital is to be transferred to the new partner. F Pays the partners P 30,000.

2. Purchase at more than book value. F purchased ¼ of D's interest for P 21,600 and ¼ of E's interest for P 14,400, making payment directly to D and E. The new partner will have a ¼ profit and loss ratio and the old partners continue to use their old profit and loss ratio.

3. Purchase at less than book value. F purchased ¼ of D's interest by paying P 26,400 directly to D and E. the new partner will have a ¼ profit and loss ratio and the old partners continue to use their old profit and loss ratio.

Problem 2. What are the capital balances of the partners immediately after admission?