Reference no: EM132779327
Question - Accounting for Partnership - The partnership of Red and White admits Blue as a partner on January 1, 20CY. The partnership has the following balances on December 31, 20PY:
Red and White Partnership Balance Sheet December 31, 20PY
Assets
Cash 450,000
Other Assets 5,500,000
Total Assets P 5,950,000
Liabilities and Owner's Equity
Accounts Payable P2,500,000
Red, Capital 2,250,000 White, Capital 1,200,000
Total Liabilities and Owner's Equity P5,950,000
Profits and losses for Red is 60% and 40% for White, respectively.
Requirements -
1. Suppose Blue pays White P1,500,000 to buy out White. Red approves Blue as a partner.
a. Record the transfer of equity on the partnership books on January 1, 20CY.
b. Prepare the partnership balance sheet immediately after Blue is admitted as a partner.
2. Suppose Blue becomes a partner by investing P1,550,000 cash on January 1, 20CY to acquire a 1/4 interest in the business.
a. Compute Blue's capital balance, and determine whether there's any bonus. If so, who gets the bonus?
b. Journalize Blue's investment in the business.
c. Prepare the partnership balance sheet immediately after Blue is admitted as a partner. Include the heading.
3. Assume that Red and White partnership liquidates by selling its other assets for P5,000,000. Prepare the entries to liquidate the partnership on January 1, 20CY.
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