Liza, Fe and Arman are partners with capital balances of P200,000, P300,000 and

Question

Liza, Fe and Arman are partners with capital balances of P200,000, P300,000 and P100,000 respectively as at the close of the year. Profit and loss ratio is 4:4:2, respectively. Six months later, Arman decides to retire from the partnership. His drawing account at this date is P15,000 and the net income for the first half of the current year w as determined by the bookkeeper from the records to be P150,000. Direction: Update the capital balances of the partners by recording the profit. Close the drawing account of Arman to the capital account. Record the partner's retirement based on three options: His interest is personally paid by the partners in the amount of PI50,000. The partners agree on an equal sharing of Arman's interest. The partnership will pay P80,000 with bonus capital recognized for the difference The partnership will pay P200,000. Assets of die partnership should first be revalued. Prepare a revised partners' equity using each option.

Explanation / Answer

Capital Accoutns of the Partners Liza Fe Arman Opening Balance 200000 300000 100000 Distribution of Profit(4:4:2) 60000 60000 30000 Closing Capital Balance 260000 360000 130000 Drawing Account of Arman Balance in Drawing Account 15000 Transferred to Capital Account 15000 Closing balance 0 Capital Account of Arman Balance after Profit 130000 Less: Drawings 15000 Closing balance 115000 Interest is personally paid by Partners Liza Fe Balance after Profit distribution 260000 360000 Add: Share of Arman 75000 75000 Closing balance 335000 435000 Partnership will Pay 80000 balance bonus recognised Liza Fe Balance after Profit distribution 260000 360000 Add: Share of Bonus 17500 17500 Closing Balance 277500 377500 Partnership will Pay P 200000 Liza Fe Balance after Profit distribution 260000 360000 Add: Goodwill 170000 170000 Closing Balance 430000 530000

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.