Francis, Chris and Ivan are to form a partnership.

Francis is to contribute cash of P 350,000;

Chris, P35, 000 and Ivan, 350,000. Francis and Ivan are not to actively participate in the
business, but will refer customers while Chris will manage the firm. Chris has to give up his
present job which gives him annual income of 420,000. The partners decided that profits and
losses should be shared equally. Upon formation, partners capital balances would be:

D, S and T have capital balances of 30,000, 20,000 and 40,000 respectively. Their P/L ratio is
10% on capital balances; S is entitled to a salary of 12,000; T is guaranteed a minimum share of
24,000 and remainder is divided by 30:30:40. The minimum profit to give an aggregate of
20,000 to S is:

X and Y are partners sharing profits 6:4. A balance sheet prepared for the partnership on April
1, 2014 shows the following:
Cash
48,000
Accounts Payable
89,000
Accounts Receivable
92,000
X, Capital
133,000
Inventory
165,000
Y, Capital
108,000
Equipment
70 ,000
Accumulated Depn
(45,000)
330,0000
330,000
On this date, the partners agree to admit Z as a partner. The terms of the agreement are that
assets and liabilities are to be restated as follows:
- An allowance for possible uncollectible of 4,500 is to be established
- Inventories are to be restated at their present replacement values of 170,000.
- Equipment is to be restated at a value of 35,000.
- Accrued expenses of 4,000 are to be recognized.
X, Y and Z will divide profit and losses as 5:3:2. Capital balances for the new partners are to be
in this ratio with X and Y making cash settlement outside of the partnership for the required
capital adjustment between themselves and Z investing cash in the partnership for his interest.
How much cash should Z contribute?
What capital adjustments should be made between X and Y?