Investment in the

Partnership
 Investment in
the Partnership
Instead of purchasing interest from the existing partners, a new partner
may be admitted by investing directly into the business. This transaction is
a transaction between the new partner and the partnership. As such, the
consideration paid by the incoming partner is recorded in the partnership's
books. Because this is an equity transaction with an owner, no gain or loss
is recognized. The following scenarios may occur when a new partner
invests in a partnership:

1. The incoming partner's investment is equal to his/her capital credit

which may be determined by multiplying the incoming partner's interest
with the partnership's net assets after the admission. The entry is simply a
debit to the invested asset and a credit to the incoming partner's capital.
 Investment in
the Partnership
2. The incoming partner's investment is greater than his/her capital credit.
The excess contribution is treated as a bonus to the old partners to
compensate for their past efforts in establishing the business. The bonus is
accounted for as an increase in the old partners' capital and a decrease in
the new partner's capital.

3. The incoming partner's investment is less than his/her capital credit. The
deficiency is treated as a bonus to the new partner (possibly because
he/she is bringing expertise or special skill into the business). The bonus is
accounted for as an increase in the new partner's capital and a decrease in
the old partners' capital.
Illustration: Investment in the partnership
The capital balances of the partners in ABC Co. are as
follows

Capital P/L ratio

A 40,000 40%
B 60,000 30%
C 80,000 30%
Total 180,000
Case 1: Investment equal to Capital credit
D invests P60,000 cash for a 25% interest in the partnership's net assets
and profits

Requirement: Provide the journal entry to record the transaction.

Solution:
Net assets before admission 180,000

Investment of D ___60,000

Net assets after admission 240,000

D's interest in net assets _____25%

D's capital credit 60,000

Investment of D ___60,000

Bonus ____-____
---------------

Date Cash 60,000

D, Capital (180K+ 60K) x 25% 60,000
to record the admission of D
to the partnership
 Notes
-Under investment in the partnership, the
consideration paid by the new partner is recorded
in the partnership's books. This results to an
increase in the partnership capital.
-After the admission of D, the total capital of the
partnership is increased to P240,000 (180K before
D's admission + 60K D's investment).
◆ A comparison between purchase of interest and investment in
the partnership is provided below:
Purchase of interest Investment in the partnership
• The incoming partner's contribution is • The incoming partner's contribution is
not recorded in the partnership's recorded in the partnership's books.
books.
• Partnership capital remains the same • Partnership capital is increased by
before and after the admission of the the incoming partner's contribution.
incoming partner.
• No gain or loss is recognized in the • No gain or loss is recognized in the
partnership's books. partnership's books.
 Case 2: Bonus to old partners
D invests P80,000 cash for a 25% interest in the partnership's net assets and
profits.

Requirement: Provide the journal entry to record the transaction and determine
the capital balances and profit and loss sharing ratio of the partners after the
admission of D.
Net assets before admission 180,000
Solution:
Investment of D ___80,000

Net assets after admission 260,000

D's interest in net assets _____25%

D's capital credit 65,000

Investment of D ___80,000

Bonus to old partners __(15,000)_

Date Cash 80,000
D, Capital (180,000 + 80,000 × 25%) 65,000
A, Capital (15,000 × 40%) 6,000
B, Capital (15,000 × 30%) 4,500
C, Capital (15,000 × 30%) 4,500
to record the admission of D to the partnership

The bonus is allocated to the old partners based on their old P/L ratio.

The capital balances of the partners after the admission of Dare

determined as follows:

A B C D Total
Capital, before admission 40,000 60,000 80,000 180,000
Investment of D 80,000 80,000
Bonus to old partners 6,000 4,500 4,500 (15,000) -
Capital, after admission 46,000 64,500 84,500 65,000 260,000
 New P/L ratio
A (100% - 25% ) x 40% 30.00%
B (100% - 25%) x 30% 22.50%
C (100% - 25%) x 30% 22.50%
25.00%
100%

Case 3: Bonus to new partner

D invests P52,000 cash for a 25% interest in the partnership's net assets and
profits.

Requirement: Provide the journal entry to record the transaction and determine
the capital balances of the partners after the admission of D.
Net assets before admission 180,000

Investment of D 52,000

Net assets after admission 232,000

D's interest in net assets 25%

D's capital credit 58,000

Investment of D 52,000

Bonus to D 6,000

Date Cash 52,000

A. Capital ( 6K * 40 %) 2,400
B, Capital ( 6K * 30 %) 1,800
C. Capital ( 6K * 30 %) 1,800
D, Capital (180K + 52K) * 25 % 58,000
to record the admission of D to
the partnership
 A B C D Total

Capital, before admission 40,000 60,000 80,000 180,000

Investment of D 52,000 52,000

Bonus to old partners (2,400) (1,800) (1,800) 6,000 -

Capital, after admission 37,600 58,200 78,200 58,000 232,000

• Observe that in all the cases above, the total partnership capital after the admission
of the new partner is equal to the actual contributed capital (i.e., capital before
admission plus new partner's investment).
 Case 4.1: Amount of investment
D wants to join the partnership through direct investment. D asks the existing
partners how much should he invest for a 20% interest in the partnership's net
assets and profits. The partnership's books include a receivable from A of
P8,000 and a loan payable to B of P10,000.

Requirement: If no bonus is allowed, how much should D invest?

Solution:
Net assets before admission 180,000
Divide by: (100%-20% interest of D) 80%
Net assets after admission 225,000
Multiply by: D's interest in net assets 20%
D’s Investment 45,000

• Checking: (180K+45K) x 20%-45K D's capital credit equal to his investment

The partners' receivable and payable accounts do not affect the computations above
because the business is continued after the partnership dissolution. These accounts are carried over to the
books of the new partnership.
 Case 4.2: Adjustment to capital and Cash settlement
After D's admission in 'Case 4.1', the partners agreed to adjust their capital
balances to reflect their proportionate shares in the partnership's net assets
based on their new profit and loss ratio. Cash settlement will be made among
the partners.

Requirement: Determine how the cash settlement is to be made.

Solution:
New P/L ratio
A (100% - 20% ) x 40% 34%
B (100% - 20%) x 30% 22%
C (100% - 20%) x 30% 22%
20%
100%
 A B C D Total

Capital before admission 40,000 60,000 80,000 180,000

Investment of D 45,000 45,000
Total 40,000 60,000 80,000 45,000 225,000

Adjusted capital
(225K x 32% 24%; 24%; & 20%) 72,000 54,000 54,000 45,000 225,000
(Payment)/Receipt 32,000 6,000 26,000 - -

• In the cash settlement, A pays B P6,000 and C P26,000

Date B, Capital 6,000

C, Capital 26,000
A, Capital 32,000 32,000
Good to record the partners'
agreed capital adjustment
 Case 4.3: Correction of errors
In Year 3, two years after D's admission in 'Case 4.1', the partnership earned profit of
P1,000,000. However, it was discovered that the following items were omitted in the
partnership's books:
Year 2 Year 3

Prepaid asset 35,000 50,000

Accrued expense 40,000 60,000

Requirement: How much is the share of A in the Year 3 profit?

Solution:

Recall the following concepts on correction of prior period errors:

If an asset-related account is understated, profit is also understated (Direct relationship).

The opposite applies to a liability-related account.

Counterbalancing errors automatically reverse in the immediately following period if not

corrected.
 Year 2 Year 3
Unadjusted profit 1,000,000
Understatement of prepaid asset in Year 2 35,000 (35,000)
Understatement of prepaid asset in Year 3 50,000
Understatement of accrued expense in Year 2 (40,000) 40,000
Understatement of accrued expense in Year 3 (60,000)

Adjusted profit 995,000

Multiply by: A's P/L ratio (see solution in "Case 4.2) 32%
Share of A in Year 3 profit 318,400
THANKYOU !!
 Table of contents

01 02 03
About the Discussion Diagnosis
patient
You can describe the You can describe the You can describe the
topic of the section topic of the section topic of the section
here here here

04 05
Treatment Patient monitoring
You can describe the You can describe the
topic of the section topic of the section
here here
 Table of contents

01 02
About the Diagnosis
patient
You can describe the You can describe the
topic of the section topic of the section
here here

03 04
Treatment Patient
You can describe the monitoring
You can describe the
topic of the section topic of the section
here here
 Introduction
You can give a brief description of
the topic you want to talk about
here. For example, if you want to
talk about Mercury, you can say
that it’s the smallest planet in the
entire System
 01
About the patient
You can enter a
subtitle here if you
need it
0 About the patient
You can enter a subtitle here if you
need it

1
 Identifying information

Mars Jupiter Saturn

Despite being red, It’s a gas giant and Saturn is a gas
Mars is a very cold the biggest planet giant and it’s
place, not hot in the Solar System composed of
hydrogen and
helium
 Identifying information

Mars Jupiter
Despite being red, It’s the biggest
Mars is a very cold planet of them all
place, not hot and named after a
god
 Patient medical history
2005
Jupiter is a gas giant and the
biggest in the Solar System

2008
Despite being red, Mars is a
Age very cold place, not hot
25

Gender Female 2012

Saturn is a gas giant and
Location Madrid, Spain has several rings
 Patient medical history
Allergies: None
Location: NY
Age: 25
1st term 2nd 3rd term Gender: Male
Jupiter is a
term
Despite being Saturn is a
gas giant and red, Mars is a gas giant. It’s
the biggest in very cold composed of
the Solar place, not hot hydrogen
System
 Patient medical history
Allergies: None
Location: NY
Age: 25
Gender: Male

70% 30%

Mercury Inflammation
Mercury is the Despite being red,
closest planet to the Mars is a cold place
Sun
Awesome
words
Awesome words
 Systems’ review

Mars Mercury
Despite being red, Mars Mercury is the closest to
is a cold place. The the Sun and the
planet is full of iron smallest one in the
oxide dust Solar System
Jupiter Saturn
Jupiter is a gas giant Saturn is a gas giant. It
and the biggest planet has rings and it’s
in the Solar System composed of hydrogen
 Systems’ review

Mars Mercury Jupiter

Despite being red, Mercury is the Jupiter is the
Mars is a cold smallest planet biggest planet of
place them all

Saturn Neptune
Saturn is a gas It’s the farthest
giant and has planet from the
several rings Sun
 Physical examination
Saturn
Saturn is the ringed
planet. It’s composed of
hydrogen
Mars
Despite being red, Mars
is a surprisingly cold
place
Jupiter
It’s a gas giant and the
biggest planet
 Physical examination
Venus Mercury
Venus is the It’s the closest
second planet from planet to the Sun
the Sun. It’s really and the smallest
hot one

Mars Neptune
Despite being red, It’s the farthest
Mars is actually a planet from the
cold place Sun and is a cold
place
A picture is
worth a
thousand
words
A picture is worth
a thousand words
 Evolution

Mercury Venus
Mercury is the Venus has a nice
smallest planet name, but it’s
hot

Mars Jupiter
To modify this graph, click on it, follow the link,
change the data and paste the new graph here,
Despite being Jupiter is the
replacing this one. red, Mars is cold biggest planet
You can see how to modify the graph here
 Evolution

Mercury Venus
Mercury is the Venus has a nice
smallest planet name, but it’s
hot

201 201 202 202

8modify this graph,
To 9 click on 0 1
it, follow the link,
change the data and paste the new graph here,
replacing this one. Learn
how to modify the graph here
 Prevalence

45% 55%
Mars Jupiter
Despite being Jupiter is the
red, Mars is cold biggest planet
Follow the link in the graph to modify
its data and then paste the new one
here. For more info, click here
 Discussion

Dr. Jenna Doe Dr. John James

“Despite being red, Mars is a “Jupiter is a gas giant and the
cold place, not hot. It’s full of biggest in the Solar System. It’s
iron oxide dust, which give its the fourth-brightest object in the
reddish cast” sky”
 Discussion

Mercury Mars Venus

Mercury is the Despite being red, Venus has a nice
smallest planet Mars is cold name, but it’s hot
150,000
Big numbers catch your audience’s attention
754,0
Big numbers catch your audience’s

00
attention
Discussion summary
Mercury is the closest planet to the
Sun and the smallest one in the Solar
System—it’s only a bit larger than the
Moon. The planet’s name has nothing
to do with the liquid metal
Discussion summary
Mercury is the closest planet to the
Sun and the smallest one in the Solar
System—it’s only a bit larger than the
Moon. The planet’s name has nothing
to do with the liquid metal
 Comparison

Jupiter Mercury Venus Mars

No No Yes Yes

Yes Yes Yes Yes

Yes No Yes Yes

No Yes Yes No

No Yes Yes No
 Comparison

John S Frank M Mike M Danny F

Mercury

Mars

Saturn
 Diagnosis

Mercury Venus Mars

Mercury is the Venus has a nice Despite being red,
smallest planet of name, but it’s hot Mars is a cold place
them all

Jupiter Saturn Neptune

Jupiter is a gas giant Saturn is composed Neptune is the
and the biggest mostly of hydrogen farthest planet from
planet the Sun
 Diagnosis

# #
1 2
Mercury Venus
It’s the closest Venus is the
planet to the Sun second planet from
and the smallest the Sun. It’s hot
one there
 Higher incidence

35% 10%
Jupiter is the Saturn is
biggest planet composed mostly
of hydrogen

40% 15%
Mercury is the Venus has a nice
smallest planet name, but it’s hot
Most affected areas

New Delhi New York

Jupiter is the Saturn is the
biggest planet ringed planet

N’Djamena Santiago
Mercury is the Venus has a nice
smallest planet name, but it’s
hot
 Treatment

Mars
Despite being red,
Mars is a cold place
full of iron oxide dust
Jupiter
Jupiter is a gas giant
and the biggest planet
in the Solar System
 Treatment
Jupiter Venus
Jupiter is the Venus has a nice
biggest planet of name, but it’s hot
them all

Saturn Mars
Saturn is a gas Despite being red,
giant with rings Mars is very cold
 Patient monitoring

Week 1 Week 2 Week 3 Week 4

Mercury is the Venus has a nice Saturn is mostly Despite being

smallest planet name, but it’s composed of red, Mars is
of them all terribly hot hydrogen actually cold
place
 Stages of hepatitis

0 0 0
1 2 3
First stage Second Third stage
Jupiter is the stage
Venus has a nice Saturn is the
biggest planet name, but it’s ringed planet
hot
 Contraindications & indications

● You can describe the ● You can describe the

treatment contraindication treatment indication here
here
● You can describe the
● You can describe the treatment indication here
treatment contraindication
● You can describe the
here
treatment indication here
● You can describe the
treatment contraindication
here
 Contraindications

● You can describe the treatment

contraindication here
● You can describe the treatment
contraindication here
● You can describe the treatment
contraindication here
Indications

● You can describe the treatment

indication here
● You can describe the treatment
indication here
● You can describe the treatment
indication here
 Post-prevention
Mars
Despite being red,
Mars is a cold
place

Jupiter Saturn
Jupiter is the Saturn is
biggest planet of composed mostly
them all of hydrogen
Mercury Venus
Mercury is the Venus has a nice
smallest planet name, but it’s hot
 Post-prevention

Jupiter Mercury Mars

Jupiter is the It’s a small Despite
biggest planet close being red,
planet of to the Sun Mars is a
them all cold place
 9h 55m 23s
Jupiter's rotation period

333,000
The Sun’s mass compared to Earth’s

386,000 km
Distance between Earth and the Moon
 35% 30%
Venus Earth
Venus has a very Earth is the planet
beautiful name where we all live on

15% 20%
Mercury Mars
Mercury is the Despite being red,
smallest planet of Mars is very cold
them all
 Case timeline

Day 2 Day 4
Venus has a very Jupiter is the
beautiful name biggest planet

Day 1 Day 3 Day 5

Mercury is the Earth is where Despite being
smallest planet we all live on red, Mars is very
cold
 Case timeline

Earth is where Venus has a very

we all live on beautiful name

01 02 03 04
Mercury is the Despite being
smallest planet red, Mars is very
cold
Conclusions
Mercury is the closest planet to the
Sun and the smallest one in the Solar
System—it’s only a bit larger than the
Moon. The planet’s name has nothing
to do with the liquid metal
 References

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