Red, White and Blue, who are accountants, agreed to combine their individual practices

into a partnership as of January 2,2016. The partners reach agreement on the following matters:

1. Each partner's capital contribution was the net amount of assets and liabilities taken

over by the partnership which were as follows:

Red P40,200

Whit 20.200

Blue 40,600

Each partner guaranteed the collectability of their receivables from their clients:

2. Thepartners decided to occupy Blue's office space until the lease expired on June

30.Themonthly rental was Pl.200,butte partners agreed that is was an excesive

rate for the space provided and that P900 monthly would be reasonable. They

agreed that the excess rent wouldbe charged to Blue at the end of the year. When

the lease expired on June 30,2016, the partnership moved to new ofice witha

monthly rental ofP1,000.

3. No salaries are to be paid to the partners. The individuals partners are to receive 20

percent ofthe gross fees billed to theirrespective clients during the first year ofte

partnership. After deducting operating expenses (excluding the excess rent), the

residual profit should be credited to the partners' capital accounts in the following

ratios: Red, 40 percent; White, 40 percent; and Blue 20 percent.

Problem 2-8: Continued

4 nAprill,2016.Green was admitted to the partnership. Green is to receive 20

percen fees from newbusiness obtained after April l,after deducting expenses

applicable to the new business. Expenses (excluding the excess rent are to be

apportioned to the newbusiness in the meratio that total expenses for the entire
year, other than bad debt losses, bore to the total gross fees.

s The folowing information pertains to the partnership'sactivities in 2016

a. Fees were billed as follows:

Red's clients P44,000

White's clients 24,000

Blue's clients 22,000

New clients acquired after January 2, 2013

Before April 1 6,000

After Apil 1 24,000

b. Total expenses for 2016 were P38,700,excluding depreciation and uncollectible

accounts expenses but including the total amount paid for rent. Depreciation

was to be computed at the rate of 10 percent on original cost ofthe followi

depreciable assets invested by the partners on January 2,2016.

Red P8,600

White 5,000

Blue 12,400

Depreciable assets were purchased during 2016 for P10,000, on which one

half year's depreciation was to be taken.

. Cash withdrawals charge to the partners' accounts during the year were:

Red P10.400

Whit 8,800

Blue 11,600

Green 5,000

d. Of Red's and White's receivables, P2,.400 and P900, respectively, proved to

be uncollectible. A new client billed in March for P3,000 had been adjudged
bankrupt, and a settlement of 40 cents on the peso was made.

Required: Prepare a Statement of Changes in Partners' Equity for the year ended

December 31,2016. Show supporting computations.