On January 1, 2021, Levi contributed P33,750 and Hanji contributed P56,250 to form a  partnership and they agreed to share profits in the ratio of their original capital contributions.  During the first year of operations, they made a profit of P16,240; Levi withdrew P4,840 and Hanji P1,400. On January 1, 2022, they agreed to admit Erwin into the partnership. He was to receive  a three-eighth interest in the capital and profits upon payment of P48,640 to Levi and Hanji, whose  capital accounts were to be reduced by transfers to Erwin's capital account of amounts sufficient  to bring them back to their original capital ratio. How should the P48,640 paid by Erwin be divided  between Levi and Hanji?

Answer rating: 100% (QA)

First in order to figure out how Erwins payment of P48640 ought to be split between Levi and Hanji we need to estimate how much each of them initially ... View the full answer