Reference no: EM132489571

a) The Capital balances and profit and loss percentages for the Marasigan, Dela Torre, and Cebedo partnership at Dec. 31, 2006 are as follows:

Marasigan, Capital (30%) 80,000

Dela Torre, Capital (50%) 90,000

Cebedo, Capital (20%) 70,000

The partners agreed to admit Carlos Liboro into the partnership on Jan. 1, 2007 for a 20% interest in the capital and income of the business.

Question 1. Prepare the journal entries to record Carlos Liboro's admission to the partnership assuming that she invested 50,000 in the partnership for the 20% interest and that partnership capital is revalued.

Question 2. Prepare the journal entries to record Carlos Liboro's admission to the partnership assuming that she invested 70,000 in the partnership for the 20% interest and that partnership capital is revalued.

b) Partners Gonzaga and Denajeba have capital account balances of 30,000 and 20,000, respectively, and they share profits and losses in a 3:1 ratio.

1. Ortiz invested 30,000 for a one-fourth interest in net assets; the total partnership capital after Ortiz's admission will be 80,000.

2. Ortiz invested 30,000, of which 10,000 is a bonus to Gonzaga and Denajeba. In conjuction with the admission of Ortiz, the carrying amount of the inventories is increased by 16,000. Ortiz's capital account is credited for 20,000.

c) Cabuyadao and Yumol are partners who share profits and losses equally and have equal capital account balances. The net assets of the partnership have a carrying amount of 80,000, Mabalot is admitted to the partnership with a one-third interest in profits of losses and net assets. Mabalot invested 34,000 cash in the partnership.

1. Bonus Method.

2. Revaluation of net assets method, assuming partnership inventories are overstated.

d) On August 31, 2006, Partners Marasigan and Reyes have capital account balances of 80,000 and 120,000 respectively. They shared profits and losses in a 2:3 ratio. They agreed to admit Samoza into the partnership with a 20% interest in net assets and profits in exchange for a 60,000 cash investment.

Marasigan and Reyes were to retain their prior income-sharing arrangement. On September 30, 2006, after the closing of the partnership's revenue and expense ledger accounts, the income summary ledger account had credit balance of 50,000.

Question 3. Prepare the journal entries to record the admission of Samoza and to close the income summary ledger account.

e) On January 31, 2006, Partners Abad, Burgos and Daganta had a following loan and capital account balances (after closing entries for Jan.):

Loan receivable from Abad 20,000 dr

Abad payable to Daganta 60,000 cr

Abad, Capital 30,000 dr

Burgos, Capital 120,000 cr

Daganta, Capital 70,000 cr

The partnership's income-sharing ratio was Abad, 50%; Burgos, 20%; and Daganta, 30%. On Jan. 31, 2006, Fernandez was admitted to the partnership for a 20% interest in total capital of the partnership in exchange for an investment of 40,000 cash.

Prior to Fernandez's admission, the existing partners agreed to increase the carrying amount of the partnership's inventories to current fair value, a 60,000 increase.

Question 4. Prepare the journal entries the increase in inventories and the admisson of Fernandez.