Death of a Partner
Burgos and Albao Wrecking Company, a partnership, is operating a general demolition business. Profits and losses are shared equally. The books are kept on a calendar basis.
After the business has been in operation for several years, Cero died on Sept. 15. Mrs. Cero desired to sell Cero's interest for P250,000. After the books were closed partners' capital accounts had credit balances as follows:
1. As the accountant for the partnership, compute the amount to be paid to Mrs. Cero under the agreement and prepare the journal entry required to enter the che issued to her in payment of her deceased husband's interest in the partnership According to the partnership agreement, the difference between the amount paid to Mrs. Cero and the book value of Cero's capital account is allocated to the remaining partners based on their ending capital balances.
2. Assume instead that Mrs. Cero is paid P500,000 for the book value of Cero's capital account; any difference is to be allocated based on ending capital balances. Prepare the necessary journal entry.
3. Assume further that one of the partners, Pascual, with the consent of the remain partners, purchased Cero's interest for P400,000 and gave Mrs. Cero a personal check for that amount. Prepare the journal entry that is required in the books account of the partnership only.