ENABLING ACTIVITY 3
Cecilion and Carmilla Partnership admits Pharsa as a new partner to form CCP
Partnership. The partnership statement of financial position immediately before the
admission of C is shown below:
Cash P260,000
Accounts Receivable 1,200,000
Inventory 1,800,000
Total Assets P3,260,000
Accounts Payable P620,000
Cecilion, Capital (70% share in P/L) 1,700,000
Carmilla, Capital (30% share in P/L) 940,000
Total Liabilities and Partner's Equity P3,260,000
The following adjustments are determined:
A. The recoverable amount of the accounts receivable is P1,150,000
B. A P200,000 recovery of a previous write- down on the inventory should be
recognized
C. Prepaid assets of P36,000 and accrued liabilities of P40,000 should be recognized.
Requirements:
A. Provide entry to record the admission of Pharsa
B. Determine the balances of the partners’ capital accounts following the admission
of Pharsa
C. Determine the profit or loss sharing ratio of the partners after the admission of
Pharsa.
Case #1: Pharsa acquires half of Camilla’s interest for P1,000,000
A. Provide entry to record the admission of Pharsa
Carmilla's Capital 491,000
Pharsa's 491,000
Capital
B. Determine the balances of the partners capital accounts following the
admission of Pharsa
Cecilion Carmilla 30% Pharsa
70%
Beginning 1,700,000 940,000 2,640,000
Capital
AR Loss (35,000) (15,000) (50,000)
Inventory 140,000 60,000 200,000
Recovery
Prepaid Assets 25,200 10,000 36,000
Accrued (28,000) (12,000) (40,000)
Liability
Capital Before 1,802,000 983,000 2,786,000
Pharsa Joins
Sale of Interest (491,900) 491,900
to Pharsa
Capital after 1,502,000 491,900 491,000 2,786,000
Pharsa joins
Case #2: Pharsa invests P712,500 cash to the partnership in exchange for a 20%
interests. Pharsa’s capital account is credited for the fair value of the 20% interest she
acquired.
A. Provide entry to record the admissions of Pharsa
Cash 712,500
Pharsa's Capital 699,700
Cecilion’s Capital 8,960
Carmilla's Capital 3,840
B. Determine the balances of the partners capital accounts following the
admission of Pharsa
Cecilion 70% Carmilla 30% Pharsa
Capital Beg. 1,700,000 940,000 712,500 2,640,000
AR Loss (35,000) (15,000) (50,000)
Invest 140,000 60,000 200,000
Recovery
Prepaid Assets 25,200 10,800 36,000
Accrued (28,000) (12,000) (40,000)
Liability
Capital Before 1,802,000 983,800 712,500 3,498,500
Pharsa Joins
Bonus to all 8,960 3,840 (12,000)
partners
Capital after 1,811,160 987,640 699,700 3,498,500
Pharsa joins
C. Determine the profit or loss sharing ratio of the partners after the admission
of Pharsa
Pharsa: 20%
Cecilion: 57% (100-20)* 70%
Carmilla: 24% (100-20)* 30%
Case #3: Pharsa invests P712,500 cash to the partnership in exchange for a 20%
interests. Pharsa’s capital account is credited for P100,000
A. Provide entry to record the admission of Pharsa
Cash 712,500
Pharsa's 100,000
Capital
Cecilion's 428,750
Capital
Carmilla's 183,750
Capital
B. Determine the balances of the partners capital accounts following the admission of
Pharsa.
Cecilion 70% Carmilla 30% Pharsa
Capital Beg. 1,700,000 940,000 712,500 2,640,000
AR Loss (35,000) (15,000) (50,000)
Invent 140,000 60,000 200,000
Recovery
Prepaid Assets 25,200 10,800 36,000
Accrued (28,000) (12,000) (40,000)
Liability
Capital Before 1,802,200 983,000 712,500 3,497,700
Pharsa Joins
Bonus to old 428,750 183,750 (612,500)
partner's
Capital after 2,230,950 1,167,550 100,000 3,498,500
Pharsa joins
C. Determine the profit or loss sharing ratio partners after the admission of Pharsa
Pharsa: 20%
Cecilion: 56% (100-20)* 70%
Carmilla: 24% (100-20)* 30%