Reference no: EM132957837

Question - Partners Isip, Mabuti, Kaya and Moto share profits in the ratio of 40%, 30%, 15% and 15% respectively. The partnership agreement provides that in the event of the death of a partner, the firm shall continue until the end of the fiscal period. Profits shall be considered to have been earned proportionately during the period and the deceased partner's capital shall be adjusted by his share of the profits or loss to the date of death. From the date of death until the date of settlement with the estate, there shall be added interest of 10% computed on the adjusted capital. The remaining partner shall continue to divide profits in the old ratio. Payment to the estate shall be made within two years from the date of the partner's death. As of January 1, 2019, the capital balances of the partners are as follows: Isip, P84,000; Mabuti, P75,000; Kaya, P48,000; and Moto, P45,000.

Moto died on September 30, 2019. The books of the partnership were closed as of December 31, arriving at a credit balance of P45,000 for the income summary account.

On December 31, 2019, Kaya notified the remaining partners that he was retiring from the partnership and was willing to accept in settlement of his interest the balance of his capital account after distribution of profits less 25%.

The remaining partners accepted his offer and issued a 120-day note to Kaya in payment of her interest.

Required -

1. Make all the necessary entries to record the above transactions on the books of the partnership.

2. Prepare the statement of changes in partners equity?