b A completed table is shown in Step 1 c Conclusion based on the table i AC CC

B a completed table is shown in step 1 c conclusion

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b. A completed table is shown in Step 1. c. Conclusion based on the table: (i) AC = CC, therefore, there is no asset revaluation. (ii) New partner: AC > CC, therefore, he receives the bonus. (iii) Old partners: AC < CC, therefore, they give the bonus shared according to their profit and loss ratio. Case 4-Positive Asset Revaluation, no Bonus. Conde invests P100,000 for a 1/5 interest in the agreed capital of P500,000. Other Assets 100,000 Calma, Capital 50,000 Castro, Capital 50,000 152
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Solution: Step 1 Fill in the table as in Cases I to 3. The completed table after Steps 1 to 4 is shown below: AC СС Asset Revaluation Old P400,000 P300,000 P100,000 d. New P100,000 P100,000 ____-____ P500,000 P400,000 P100,000 Step 2 Compare AC and CC. In this case, AC > CC (P500,000 > P400,000). Therefore, there is a positive asset revaluation. Step 3 Determine if there is bonus. a. Compute for the capital credit of the new partner. AC x fraction of interest, P500,000 x 1/5 = 100,000. b. Write this amount in the AC column of the new partner. c. Compare the new partner's AC with his CC. In this case, his AC = CC (P100,000); therefore, there is no bonus. Step 4 Complete the table by filling in the missing figures. a. AC or capital credit of the old partners. AC x fraction of interest P500,000 x 4/5 = P400,000 or CC+ Asset Revaluation P300,000 + P100,000 = P400,000 b. A completed table is shown in Step 1. c. Conclusion based on the table: (i) AC > CC, therefore, there is a positive asset revaluation. (ii) New partner: AC = CC, therefore, there is no bonus. (iii) Old partners: AC > CC, therefore, they are credited for the asset revaluation shared according to their profit and loss ratio. Case 5 - Negative Asset Revaluation, No bonus. Conde invests P60,000 for a 1/5 interest in the agreed capital of P300,000 Calma, Capital 30,000 Castro, Capital 30,000 Other Assets 60,000 Solution: Step 1 Fill in the table as in Cases I to 4. The completed table after Steps 1 to 4 is shown below: AC CC Asset Revaluation 153
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Old P240,000 P300,000 (P60,000) New 60,000 60,000 ____-___ P300,000 P360,000 (P60,000) Step 2 Compare AC And CC. In this case, AC < CC (P300,000 < P360,000). Therefore, there is a negative asset revaluation. Step 3 Determine if there is bonus. a. Compute for the capital credit of the new partner. AC x fraction of interest; P300,000 x 1/5 = P60,000. b. Write this amount in the AC column of the new partner. c. Compare the new partner's AC with his CC. In this case, his AC = CC (P60,000 = P60,000); therefore, there is no bonus. Step 4 Complete the table by filling in the missing figures. a. AC or capital credit of the old partners. AC x fraction of interest P300,000 x 4/5 = P240,000 or CC- Asset Revaluation P300,000 - P60,000 = P240,000 b. completed table is shown in Step 1. c. Conclusion based on the table: (i) AC < CC, therefore, there is a negative asset revaluation. (ii) New partner: AC = CC, therefore, there is no bonus. (iii) Old partners: AC < CC, therefore, they are charged for the asset revaluation shared according to their profit and loss ratio In the succeeding illustrations, the tables are summarized for easier comparison. 154
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AGREED CAPITAL IS NOT GIVEN There are cases when the contributions and the fraction of interest of the new partner are given, but the agreed capitalization of the new firm is not specified. When such a situation exists, the admission of the new partner is recorded using any of these two methods: 1. Bonus method
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