Reference no: EM132960292
Question - LUCIO, HENRY and JOHN are partners sharing profits and losses of 40%, 40% and 20%, respectively. The December 31, 2017 balance sheet of the partnership before any profit allocation was summarized as follows:
ASSETS
Cash 90,000
Inventories 60,000
Equipment 75,000
Trademark 22,500
TOTAL Assets 247,500
LIABILITIES & CAPITAL
Accounts Payable 7,500
LUCIO, Capital 100,000
JOHN, Loan 5,000
HENRY, Capital 90,000
JOHN, Capital 45,000
TOTAL Liabilities & Capital 247,500
The income summary account has a credit balance of P25,000 for the year 2017. On January 1, 2017, a partner has decided to retire from the partnership and by mutual agreement among partners; the following have been arrived at:
Inventories amounting to P10,000 is considered obsolete and must be written off
Equipment should be adjusted to their current value of P50,000
Trademarks are to be written-off immediately before the retirement
It was agreed that the partnership will pay the retiring partner for his interest in the partnership inclusive of loan balance.
Required -
1. If JOHN retired and received P47,500, by how much will be the adjusted capital of HENRY be higher or (lower) than LUCIO under specific revaluation of asset method (specific revaluation)?
2. If JOHN retired and received P47,500, by how much will the adjusted capital of LUCIO under specific revaluation of asset method (specific revaluation)?
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