Reference no: EM132708787

Problem - Admission by Investment of Assets

On Jan. 31, 2018, Partners Abad, Ramos and Cammayo had the following loan and capital account balances (after closing entries for Jan.):

Loan receivable from Abad P 20,000 dr

Abad payable to Cammayo 60,000 cr

Abad, Capital 30,000 dr

Ramos, Capital 120,000 cr

Cammayo, Capital 70,000 cr

The partnership's income-sharing ratio was Abad, 50%; Ramos, 20%; and Cammayo, 30%. On Jan. 31, 2018, Gonzales was admitted to the partnership for a 20% interest in total capital of the partnership in exchange for an investment of P40,000 cash.

Prior to Gonzales's admission, the existing partners agreed to increase the carrying amount of the partnership's inventories to current fair value, a P60,000 increase.

Required - Prepare the journal entries the increase in inventories and the admission of Gonzales.