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"

May and Jun are partners who have capital balances of P1,000,000
and P800,000 and share profits 60:40 respectively. They agreed to
admit Julie as a partner upon her contribution of P600,000.
One-fourt
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User Mabg
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1 Answer

7 votes

May and Jun, with capital balances of P1,000,000 and P800,000, share profits at a 60:40 ratio. Julie is admitted as a partner after contributing P600,000. One-fourth of her investment is allocated to goodwill. The amount of Julie's goodwill is P150,000.A new profit and loss sharing ratio of 50:30:20, with Julie getting a 20% share, was agreed upon by the partners. Furthermore, the partners' capital accounts were increased to reflect the increase in the value of the company as a result of the admission of a new partner and the development of goodwill. Because of the new partner's admission, Julie's investment is split into two portions: the initial contribution of P450,000 and the goodwill of P150,000. Julie's initial contribution of P450,000 is used to calculate the adjusted capital balances of May and Jun. The new adjusted capital balances are as follows: May, P1,300,000, and Jun, P1,050,000. The allocation of the additional capital contributed by Julie and her share of goodwill is shown below:Partnership Capital AccountsMayJunJulieInitial capital balancesP1,000,000P800,000-PAdjusted Capital Balance (after Julie's contribution)P1,450,000P1,200,000P450,000Share in profit50%30%20%Goodwill balanceP150,000-P-PJulie's share of goodwillP30,000-P-PJulie's adjusted capital balanceP480,000P360,000P690,000TotalP2,080,000P1,560,000P1,140,000The above table indicates the adjusted capital balances of each partner, given that Julie has invested P450,000 in the company and one-fourth of her investment has been allocated to goodwill. In addition, a new profit and loss sharing ratio of 50:30:20, with Julie receiving a 20% share, has been agreed upon by the partners. As a result of Julie's admission, the company's value has increased.

User KaraokeStu
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