1. Carrot joins the partnership of Apple and Banana. The partnership's statement of financial position before Carrot's admission is as follows Cash Accounts receivable |Inventory Equipment Total Assets 30, 000 140, 000 | 200, 000 500, 000 870, 000 Accounts Payable | Apple, Capital (60%) Banana, Capital (40%) 80, 000 515, 000 275, 000 | Total liab & Equity 870, 000 The following adjustments are determined: A. The recoverable amount of the accounts receivable is P120, 000. B. The inventory has a net realizable value of P160, 000. C. The equipment has a fair value of P450, 000. D. Unrecorded liabilities amount to P20, 000. Solutions: Case 1: Purchase of interest from one partner Carrot acquires half of Banana's capital interest for P800, 000. Requirements: Provide journal entry and determine tho capital balances and P/L ratio of the partners after Carrot's admission.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.