Reference no: EM133078203

Question - 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 P450,000

Other Assets 5,500,000

Total Assets P5,950,000

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.

Required - 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.