Question

In: Accounting

Assume the following data on January 1, 2019 for KLM Partnership had the following condensed balance...

Assume the following data on January 1, 2019 for KLM Partnership had the following condensed balance sheet:

Assets                                                                              Liabilities and Capital

Cash                                                   P60,000               Liabilities                                           P12,000
Non-cash assets                              48,000                 K, Capital (30%)                               36,000
Loans receivable – K                         6,000                 L, Capital (50%)                                48,000
                                                                                          M, Capital (20%)                              18,000
Total                                                   P114,000                                                                      P114,000              

The percentages in parentheses after partner’s capital balances represent their respective interests in profits and losses. On May 1, 2019, K retires from the partnership. The net income of the partnership to date of retirement amounted to P24,000. The partnership paid cash to the retiring partner also on retirement date.

Required:

  1. Determine the total interest of K, L and M immediately before the retirement of K.
  2. Prepare journal entries to record the retirement of K, assuming:
  1. Payment at book value. The partnership paid K, P37,500.
  2. Payment at more than book value. The partnership paid K, P42,000. Included in the non-cash assets is an inventory costing P7,200 with a fair value of P12,000. The remaining partners continue to use their old profit and loss ratio. (Hint: Record first the adjustment to capital balances on the fair value measurement of inventory)

b.1 Bonus method

b.2 Asset revaluation method (Total revaluation)

c.    Payment at less than book value. The partnership paid K, P31,200.

     c.1 Bonus method
       c.2 Asset revaluation method (Total revaluation)

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ekkarill92 answered 3 years ago
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