Chapter 1
Chapter 1
Problem I Problem I
Requirement 1:
Requirement 1: Assuming that A and B Assuming that A and B agree that each partner is to receive a capitalagree that each partner is to receive a capital credit equal to the agreed values of the net assets each partner invested:
credit equal to the agreed values of the net assets each partner invested:
T
To o record record adjustmadjustments:ents: nothing to adjust since both of them have no set of books. nothing to adjust since both of them have no set of books.
T
To o close close the the books:books: nothing to close since both of them have no set of books. nothing to close since both of them have no set of books.
To record investments: To record investments:
Partnersh
Partnership ip books:books:
Cash………. 120,000 Cash………. 120,000 Inventory………. 120,000 Inventory………. 120,000 Equipment……….. 240,000 Equipment……….. 240,000 A, capital……… A, capital……….………... .. 480,000480,000 Initial
Initial investment.investment.
Cash……….. 120,000 Cash……….. 120,000 Lan……….. 240,000 Lan……….. 240,000 !uilin"………. 480,000 !uilin"………. 480,000 #ort"a"e
#ort"a"e paya$le………paya$le………. ………. 240,000240,000 !,
!, capital………capital……….. .. %00,000%00,000 Initial
Initial investment.investment. Requirement 2:
Requirement 2: Assuming that A and B Assuming that A and B agree that each partner is to receive an equalagree that each partner is to receive an equal capital interest.
capital interest.
To record adjustments:
To record adjustments: nothing to adjust since both of them have no set of books. nothing to adjust since both of them have no set of books.
To close the books:
To close the books: nothing to close since both of them have no set of books. nothing to close since both of them have no set of books.
To record investments: To record investments:
Partnersh
Partnership ip books:books:
Bonus
Bonus Approach:Approach:
Cash……… Cash……… ……… 120,000120,000 Inventory……… 120,000 Inventory……… 120,000 Equipment………. 240,000 Equipment………. 240,000 A, capital……… A, capital……….……….. . 480,000480,000 Cash……… 120,000 Cash……… 120,000 Lan………. 240,000 Lan………. 240,000 !uilin"……… 480,000 !uilin"……… 480,000 #ort"a"e
#ort"a"e paya$le………paya$le……… ……… 240,000240,000 !, !, capital.………capital.……….……….…… …… %00,000%00,000 !, !, capital………capital……….. ….. %0,000%0,000 A, capital……… A, capital……… ……… %0,000%0,000 T
Total otal agreed agreed capital capital (P4!"!!! (P4!"!!! # # P$!!"!!!%P$!!"!!!%&.P &.P '"!!"!!!'"!!"!!! ultiplied
ultiplied b): b): *apital *apital interest interest (equal%&&&(equal%&&&... ... '+,'+, Partner-s
Partner-s individual individual capital capital interest&&&&interest&&&&&.P &.P 4!"!!!4!"!!! /ess:
/ess: A-s A-s capital capital interest&&&&interest&&&&&&&&&..&. &&&&&..&. 4!"!!!4!"!!! Bonus
Bonus to to A&&.&&&&&&&&&&A&&.&&&&&&&&&&&&&&..P &&&&..P $!"!!!$!"!!!
Revaluation
Cash……… 120,000 Inventory……… 120,000 Equipment………. 240,000 A, capital……….. 480,000 Cash……… 120,000 Lan………. 240,000 !uilin"………... . 480,000 #ort"a"e paya$le……… 240,000 !, capital.……….…… %00,000
Assets &or "oo'ill or intan"i$le asset(………... 120,000
A, capital………..……….. 120,000
)otal a"ree capital &*%00,000 + 1+2(………..….*1,200,000 Less )otal contri$ute capital &*480,000
-* %00,000(………....… 1,080,000 oo'ill to A………..……….* 120,000 Problem II
Agreed 0air 1alues
2nvested b) 3ohn 2nvested b) 3e 2nvested b) 3ane *ash P'!!"!!! 555 55 5 6quipment P ''!"!!! 55 5 Total assets '!!"!!! P ''!"!!! !
7ote pa)able assumed b) partnership 5 5 5 8!"!!! 5 5 5
7et assets invested P'!!"!!! P !"!!! P !
1$ Bonus %ethod 2$ !ood"ill %ethod Revaluation o& Asset#
*ash '!!"!!!
*ash '!!"!! 6quipment ''!"!!!
6quipment ''!"!! 9oodill ;!"!!!
7ote Pa)able 7ote Pa)able 8!"!!
3ohn" *apital 3ohn" *apital ;!"!!
3e"*apital 3e" *apital ;!"!!
3ane" *apital 3ane" *apital ;!"!!
,. The bonus method is used hen
3ohn and 3e recogni<e that 3ane is bringing something of value to the =rm other than a tangible asset" but the) do not ant to recogni<e an intangible asset. To equali<e the capital accounts" P4!"!!! is transferred from 3ohn>s capital account and P,!"!!! is transferred from 3e>s capital account.
The goodill method is used hen the partners recogni<e the intangible nature of the skills 3ane is bringing to the partnership. ?oever" the capital accounts are equali<ed b) recogni<ing an intangible asset and a corresponding increase in the capital accounts of the partners. @nless the intangible asset can be speci=call) identi=ed" such as a patent
being invested" it should not be recogni<ed" because of a lack of justi=cation for goodill in a ne business. Problem III '. (a% *ash '8"!!! Accounts eceivable "!!! Cce Dupplies ,"!!! Cce6quipment 8!"!!! AccountsPa)able ,"!!! Tom" *apital '"!!! *ash ',"!!! Accounts eceivable $"!!! Cce Dupplies !! /and 8!"!!! AccountsPa)able "!!! ortgagePa)able '"!! 3ulie" *apital ,"!!! (b% Tom" Eraing '"!!! *ash '"!!! 3ulie" Eraing ',"!!! *ash ',"!!! (c% 2ncome Dummar) !"!!! Tom" *apital P!"!!! × (P'"!!!+PF$"!!!% 88"8 3ulie" *apital P!"!!!× (P,"!!!+PF$"!!!% '$"44F Tom" *apital '"!!! 3ulie" *apital ',"!!! Tom" Eraing '"!!! 3ulie" Eraing ',"!!! ,. T A7E 3@/26 PAT76D?2P
Dtatement of *hanges in Partners> *apital 0or the Gear 6nded Eecember 8'" ,!H4
Tom 3ulie Total
*apital balances" 3an. ' P ! P ! P !
Add: Additional investments '"!!! ,"!!! F$"!!! 7et income allocation 88"8 '$"44F !"!!!
Totals P 4"8 P 4'"44F P',$"!!!
/ess: Iithdraals '"!!! ',"!!! ,F"!!!
*apital balances" Eec. 8' P $;"8 P ,;"44F P;;"!!!
Problem I'
Book o& ( is to be retained b) the ne" partnership. The folloing procedures are to be folloed:
2ndividual versus Dole Proprietor
Books of 2ndividual
JBooks of Dole Proprietor
*losing entries (real accounts% 7+A 7o
2nvestments GesJJ
Balance Dheet Ges
J Books of ?K Partnership books
JJ 2nvestments of individualK additional investments or ithdraals of sole proprietor.
1. Books of Sole Proprietor (H): a$ To record adjustments:
a. /, capital……… 1,800
Allo'ance or ou$tul accounts………. 1,800 Aitional provision compute as ollo's
equire allo'ance 10 3 *48,000 * 4,800 Less *revious $alance……… 5,000 Aitional provision……… * 1,800
$. Interest receiva$le or accrue interest income………. 5,%00
/, capital……… 5,%00
Interest income or nine months compute as ollo's *%0,000 3 8 3 6+12 *5,000.
c. /, capital……….. %,000
#erchanise inventory……….. %,000 7ecline in the value o merchanise.
*2,000 9 *21,000 *%,000. . /, capital………. 4,800 Accumulate epreciation………. 4,800 :ner epreciation. e. *repai e3penses………... 2,400 /, capital……… 2,400
E3penses pai in avance.
/, capital……… ,200
Accrue e3penses………. ,200
:nrecore e3penses.
*ote: All adjustment that reLects nominal accounts should be coursed
through the capital account" since all nominal accounts are alread) closed at the time of formation.
b$ To close the books: nothing to close since the books of ? ill be retained.
c$ To record investment:
Cash………. 11%,100
I, capital……… 11%,100
Initial investment compute as ollo's
:na;uste capital o /………* 24%,000 A &euct( a;ustments
a. 7ou$tul accounts...………...& 1,800( $. Interest income……….. 5,%00 c. 7ecline in the value o merchanise….& %,000( . :ner<epreciation……….& 4,800( e. *repai e3penses……….. 2,400 Accrue e3penses………...& ,200(
A;uste capital $alance o /………..……...* 252,200 7ivie $y Capital interest o /……… 2+5 )otal a"ree capital……….…….* 548,500 #ultiplie $y Capital interest o I………..…… 1+5 Investment o I………* 11%,100
*ote: The initial investment of ? is alread) recorded since his books are alread) retained. 7o further entr) is required since there are no additional investments or ithdraals made b) ?.
,. The balance sheet for both cases presented above is as follos: ?2 Partnership Balance Dheet 7ovember '" ,!H4 Assets *ash P ,8$"'!! Accounts receivables P 4"!!!
/ess: Alloance for doubtful accounts&&&... 4"!! 48",!! 7otes receivable&&... $!"!!! 2nterest receivable&&&&&&... 8"$!! erchandise 2nventor)... ,'"!!! Prepaid eHpenses&&&&... ,"4!! 6quipment (net% &&&&... P F,"!!!
/ess: Accumulated depreciation&&&&&&... '!"!! $'",!! Total
Assets... .
P 4,F"!!
/iabilities and *apital /iabilities Accrued eHpenses&&.. ... P F",!! Accounts pa)able... ',"!!! 7otes pa)able&&&&... $!"!!! Total /iabilities... .. P F;",!! *apital... ... ?" capital&&&&&&&&&... P ,8,",!! 2" capital&&&&&&&... ''$"'! ! Total P 84"8!!
*apital... Total /iabilities and
*apital...
P 4,F"!!
Problem '
*e" set o& books. The folloing procedures are to be folloed: Dole Proprietor versus Dole Proprietor
Books of Dole Proprietor (Baker% Books of Dole Proprietor (*arter%
J7e Det of Books
Adjusting entries Ges Ges
*losing entries (real accounts%
Ges Ges
2nvestments GesJJ
Balance Dheet Ges
J Partnership books
JJ Additional investments or ithdraals of sole proprietors.
1. Books of Sole Proprietor a$ To record adjustments:
Books o& + Books o& ,
a. 3" capital&&&&&&&&&&',"!!! erchandise 2nventor)&& ',"!!! Iorthless inventor). a. erchandise 2nventor)&&&& $"!!! M" capital&&&&&&&&& $"!!! @pard revaluation. b. 3" capital&&&&&&&&&& F",!!
Alloance for doubtful Accounts&&&&&&&.. F",!!
Iorthless accounts.
b. M" capital&&&.&&&&&&&. 8"!!! Alloance for doubtful
accounts&&&&&&&&. 8"!!! Additional provision. equired alloance: N H P'!"!!!&&.. P;"!!! /ess: Previous Balance&&&.. $"!!! Additional Provision....&&&&P8"!!! c. ent receivable&&&&&&&',"!!! 3" capital&&&&&&&&. ',"!!! 2ncome earned. c. M" capital&&&&&&&&&&&. ;"$!! Dalaries pa)able&&&&&&. ;"$!! @npaid salaries. d. 2nterest receivable&&&&&&&'",!! M" capital&&&&... '",!!
2nterest income from August 'F to ctober '.
P$!"!!! H '$N H 4+8$! e. 3" capital&&&&&&&&&& "4!!
Cce supplies&&&&&&. "4!!
f. 3" capital&&&&&&&&&& $"!!! Accumulated depreciation 5 equipment&&&&&& $"!!! @nder5depreciated. g. M" capital&&&&&&&&&&&',"!!! Accumulated depreciation5
0urniture and =Htures&&& ',"!!!
@nder5depreciated. h. 3" capital&&&&&&&&&&. '"!!
2nterest pa)able&&&&&. '"!!
2nterest eHpense from 3ul) ' to ctober '. P$!"!!! H ',N H 8+', i. Patent&&&&&&&&&&&&. 4"!!! M" capital&&&&&&&&.. 4"!!! @nrecorded patent. @nadjusted capital of 3&&.&&&.P
8F,"!!! Add(deduct%: adjustments: a. Iorthless merchandise&&.. ( ',"!!!% b. Iorthless accounts&&&&. ( F",!!% c. ent income&&&&&&.&. ',"!!!
e. Cce supplies eHpense&&. ( "4!!%
f. Additional depreciation&& ( $"!!!%
h. 2nterest eHpense&&&&&& ( '"!!%
Adjusted capital of 3&&&&&&& P84"$!! @nadjusted capital of M.. &&&&&...P48,"!!! Add(deduct%: adjustments: a. erchandise revaluation&&.. $"!!! b. Iorthless accounts&&&&&. ( 8"!!!% c. Dalaries&&&&&.&&.&&&.. ( ;"$!!% d. 2nterest income&&&&&&&.. '",!! g. Additional depreciation&&& ( ',"!!!% h. Patent&&&&.&&&.&&&&. 4"!!!
Adjusted capital of M&. &&&&&&..P4$,"$!!
b$ To close the books:
Books o& + Books o& ,
Alloance for doubtful
accounts... ',"!!! Accumulated depreciation O equipment&&&&&&&& $!"!!! Accounts pa)able&&&&&';"$!! 7otes pa)able&&&&&&& $!"!!! 2nterest pa)able&&&&&&. '"!! 3" capital&&.&&&&&&&. 84"$!! *ash&&&&&&&&&& ;!"!!! Accounts receivable&&. ,'$"!!! erchandise inventor)&. '!"!!! Cce supplies&&&&&.
Alloance for doubtful
accounts... ;"!!! Accumulated depreciation O
furniture and =Htures &&&. 8$"!!! Accounts pa)able&&&&&. ',!"!!! Dalaries pa)able&&&&&&. ;"$!! M" capital&&.&&&&&&&. 4$,"$!! *ash&&&&&&&&&&. 4"!!! Accounts receivable&&.. '!"!!! 7otes receivable&&&&. $!"!!! 2nterest receivable&&&... '",!!
,4"!!!
6quipment&&&&&&&. ',!"!!!
ent receivable&&&&... ',"!!!
*lose the books of 3.
erchandise inventor)&.. '!"!!!
0urniture and =Htures.&&.. '44"!!!
Patent&&&&.&&&&&. 4"!!!
*lose the books of M..
2$ *e" -et o& Books . To record investments: *ash&&&&&&&&&&&&&&&&&&&&&&&&. ;!"!!! Accounts receivable&&&&&&&&&&&&&&&&.. ,'$"!! ! erchandise inventor)&&&&&&&&&&&&&&&.. '!"!! ! Cce supplies&&&&&&&&&&&&&&&&&&&.. ,4"!!! 6quipment (net% &&&&&&&&&&&&&&&&&&... $!"!!! ent eceivable&&&&&&&&&&&&&&&&&&.. ',"!!!
Alloance for doubtful accounts&&&&&&&&. ',"!!! Accounts pa)able&&&&&&&&&&&&&&&.. 8;"$!! 7otes pa)able&&&&&&&&&&&&&&&&&. $!"!!! 2nterest pa)able&&&&&&&&&&&&&&&&.. '"!! 3" capital&&&&&&&&&&&&&&&&&&&& 4$"$! ! *ash&&&&&&&&&&&&&&&&&&&&&&&&. 4"!!! Accounts receivable&&&&&&&&&&&&&&&&.. '!"!! ! 7otes receivable&&&&&&&&&&&&&&&&&&. $!"!!! 2nterest receivable&&&&&&&&&&&&&&&&&.. '",!! erchandise inventor)&&&&&&&&&&&&&&&.. '!"!! ! 0urniture and =Htures (net%&..
&&&&&&&&&&&&..
'!"!! ! Patent&&&&..&&&&&&&&&&&&&&&&&&... 4"!!!
Alloance for doubtful accounts&&&&&&&&. ;"!!! Accounts pa)able&&&&&&&&&&&&&&&.. ',!"!! ! Dalaries pa)able&. &&&&&&&&&&&&&&&. ;"$!! M" capital&&&&&&&&&&&&&&&&&&&& 4$,"$! ! 8. ( I
Adjusted capital (refer to 'b% 84"$!! 4$,"$!! 7et adjustments (debit%+credit (P ,8"4!!% P 8!"$!! 4. The balance sheet after formation is as follos:
3 and M Partnership Balance Dheet ctober '" ,!H4 Assets *ash... ... P '44"!!! Accounts receivables ... P8;$"!!! /ess: Alloance for doubtful
accounts&&&... ,'"!!! 8F"!!! 7otes receivable&&... $!"!!! 2nterest receivable&&&&&&... '",!! ent receivable&&&&&&... ',"!!! erchandise 2nventor)... 88!"!!! Cce supplies... ,4"!!! 6quipment (net% &&&&... $!"!!! 0urniture and =Htures (net%
&&&&&&&... '!"!!! Patent&&&&&&&&... ... 4"!! ! Total Assets... . P'"'$,",! !
/iabilities and *apital /iabilities Dalaries pa)able&&&&&... P ;"$!! Accounts pa)able... ';"$!! 7otes pa)able&&&&... $!"!!! 2nterest pa)able&&&&&... '"!! Total /iabilities... P ,8'"!!!
. *apital 3" capital&&&&&&&&&... P 4$"$!! M" capital&&&&&&&... 4$,"$!! Total *apital... P ;8'",!! Total /iabilities and
*apital...
P'"'$,",! !
Problem 'I
'. Total assets O P'"!;4"!!!" at fair value ,. Total liabilities 5 P4!"!!!" at fair value
8. Total capital 5 P4"!!! (P'"!;4"!!! O P4!"!!!%
Balance Dheet
3anuar) '" ,!!;
Assets /iabilities and
Capital
*ash
P
F!"!!!
/iabilities
Account eceivable (net%
'!"!!!
Accounts Pa)able
P
';!"!!!
erchandise 2nventor)
,!"!!!
ortgage Pa)able
8!"!!
!
Building (net%
$!!"!!!
Total /iabilities
P
4!"!!!
0urniture and 0iHture (net%
'!"!!!
*apital:
Accounts
Pa)able
/"
*apital
P
,$!"!!!
ortgage
Pa)able
"
*apital
,;4"!
!!
Total *apital
P
4"!!!
Total
Assets
P'"!;4"!
!!
Total /iabilities and
*apital
P
'"!;4"!!
!
%ultiple Choice Problems
'. c O P4"!!!
,. d O the prevailing selling price hich is also the fair market value.
8. b 5 (P4!!"!!! 5 P';!"!!!% # QP,F!"!!! 5 (P4!!"!!! 5 P';!"!!!%R+8 S P,8!"!!! 4. c
. b 5 P$!"!!! # P!"!!! # P'!!"!!! S P,4!"!!!
$. c 5 P8!"!!! # P!"!!! # P,"!!! S P'!"!!!+8 S P8"!!! 5 P8!"!!! S P"!!! F. a
Total Agreed *apital (P!"!!!+4!N% &&&&&&&&&&...
P',"!!! /ess: Total *ontributed *apital (P$"!!! # P!"!!!%
&&...
''"!!!
&&&&&&&...
Assets" fair value (P,!"!!! # P$!"!!! # P'"!!!%&&&&&&&&&&P ;"!!! /ess: /iabilities assumed&&&&&&&&&&&&&&&&&&&..& 8!"!!! Bill" capital..&&&&&&&&&&&&&&&&&&&&&&&&&& P $"!!!
.
b The capital balances of Iilliam (II% and artha (% at the
date of partnership formation are determined as follos:
Iilliam
artha
*ash
P,!"!!!
P
8!"!!!
2nventor)
5
'"!!!
Building
5
4!"!!!
0urniture and equipment
'"!!!
5
Total
P8"!!!
P "!!!
/ess mortgage assumed
b)
partnership
('!"!!!%
Amounts credited to capital
P8"!!!
P F"!!!
;. c
6van
?elen
@nadjusted
capital
;"$,
88"!!
Add (deduct% adjustments:
Alloance
( %
( 4!%
Eepreciation
( ;!!%
Adjusted
capital
;"!F!
8,"';
'!. c: 3ones O P!"!!! # P4!!"!!! O P',!"!! S P8$!"!!! Dmith O P4!"!!! # P,!"!!! O P$!"!!! S P,$!"!!! ''. c O P8"8F4 O refer to 7o. ', ',. c O P'F"$F@nadjusted capital of **&&&&&&&&&&&&&&&&&&&&&&&&&.P 88"!!! Add (deduct%: adjustments5
Alloance for doubtful accounts (8N H P'4",!!%&&&&&&&&&&&&...( 4,$% 2ncrease in merchandise inventor) (P,8"!!! O P,!"!!!%&&&&&&&&&& 8"!!! Prepaid salar)&&&&&&&&&&&&&&&&&&&&&&&&&&&&.... $!! Accrued rent eHpense&&&&&&&&&&&&&&&&&&&&&&&&&( !!% Adjusted capital balance of **&&&&&&&&&&&&&&&&&&&&&&P 8"8F4 Eivided b): *apital interest of **&&&&&&&&&&&&&&&&&&&&.... ,+8 Total capital of the partnership&&&&&&&&&&&&&&&&&&&&&&&P 8"!$'
/ess: Adjusted capital balance of **&&&&&&&&&&&&&&&&&&&.. 8"8F4 *apital balance of EE&&&&&&&&&&&&&&&&&&&&&&&&&&.. P 'F"$F '8. a
Total assets:
*ash PF!"!!!
achiner) F"!!!
Building ,,"!!! P 8F!"!!!
/ess /iabilities (ortgage pa)able% ;!"!!!
7et assets (equal to 00-s capital account% P ,!"!!! '4. d
00" capital (see no.'8% P
Eivide b) 00-s P / share percentage F!N
Total partnership capital P 4!!"!!!
equired capital of ** (P4!!"!!! H 8!N% P ',!"!!!
/ess: Assets alread) contributed:
*ash P8!"!!!
achiner) and equipment ,"!!!
0urniture and =Htures '!"!!! $"!!!
*ash to be invested b) ** P "!!!
'. a
Agreed 0air 1alues 2nvested
b) 3ohn 2nvested b) 3e 2nvested b) 3ane *ash '!!"!!! 5 55 555 6quipment ''!"! !! 5 5 5 Total assets '!!"!!! ''!"!!! !
7ote pa)able assumed b) partnership 5 5 5
8!"!!! 5 5 5
7et assets invested '!!"!!! !"!!! !
Bonus ethod 9oodill ethod
*ash '!!"!
*ash '!!"!! 6quipment ''!"!
6quipment ''!"!! 9oodill ;!"!!
7ote Pa)able 7ote Pa)able 8!"!!
3ohn" *apital 3ohn" *apital ;!"!!
3e" *apital 3e" *apital ;!"!!
3ane" *apital 3ane" *apital ;!"!!
Note:
)he $onus metho is use 'hen =ohn an =e> reco"ni?e that =ane is $rin"in" somethin" o value to the @rm other than a tan"i$le asset, $ut they o not 'ant to reco"ni?e an intan"i$le asset. )o equali?e the capital accounts, *40,000 is transerre rom =ohns capital account an *20,000 is transerre rom =e>s capital account.
)he "oo'ill metho is use 'hen the partners reco"ni?e the intan"i$le nature o the sBills =ane is $rin"in" to the partnership. /o'ever, the capital accounts are equali?e $y
reco"ni?in" an intan"i$le asset an a corresponin" increase in the capital accounts o the partners. :nless the intan"i$le asset can $e speci@cally ienti@e, such as a patent $ein"
investe, it shoul not $e reco"ni?e, $ecause o a lacB o ;usti@cation or "oo'ill in a ne' $usiness.
'$. c O refer to 7o. ' for computation. 'F. a
00" capital:
@nadjusted balance P F"!!!
Adjustments:
Accumulated depreciation ( '"!!%
Adjusted balance P 48"!! 99" capital:
@nadjusted balance P 4;"!!
Adjustments:
Accumulated depreciation ( 4"!!%
Alloance for doubtful account ( 4"!!%
Adjusted balance P 4!"!!
'. c
99-s adjusted capital (see no. 'F% P 4!"!!
Eivide b) 99-s P / share percentage 4!N
Total partnership capital P '!'",!
ultipl) b) 00-s P / share percentage $!N
00-s capitalcredit $!"F!
00-s contributed capital (see no. '% 48"!!
Additional cash to be invested b) 00 P
'F",! ';. d
Total capital of the ne partnership (see no. ,!% P ,;$"F
ultipl) b) -s interest ,!N
*ash to be invested b) P ;"8F
,!. (a%
PP Total
($!N% (4!N%
@nadjusted capital balances P'88"!!! P'!"!!!
P,4'"!!!
Adjustments:
Alloance for bad debts ( ,"F!!% ( '"!!% ( 4"!!%
2nventories 8"!!! ,"!!!
"!!!
Accrued eHpenses ( ,"4!!% ( '"$!!%
( 4"!!!%
Adjusted capital balances P'8!";!! P'!$"$!! P,8F"!!
Total capital before the formation of the ne partnership (see above% P ,8F"!! Eivide b) the total percentage share of and PP (!N # 8!N% !N Total capital of the partnership after the admission of P ,;$"F
,'. a
Agreed *apital *ontributed *apital Dettlement
P'4"48F.! (!N H P,;$"F% P '8!";!! P 'F"8F.!
PP ;"!$,.! (8!N H P,;$"F% '!$"$!! ('F"8F.!%
Therefore" ill pa) PP P'F"8F.! ,,. c
Total partnership capital (P''8"$4!+'+8% P 84!";,!
/ess EE-scapital ''8"$4!
**-s capital after adjustments P ,,F",!
Adjustments made:
Alloance for doubtful account (,N H P;$"!!!% '";,!
erchandise inventor) ( '$"!!!%
PrepaideHpenses ( ",!!%
AccruedeHpenses 8",!!
**-s capital before adjustments P ,''",!!
,8. a
Assets invested b) **:
*ash:
*apital P,''",!!
Add Accounts pa)able 4;"$!!
Total assets (eHcluding cash% ,$!"!!
/ess 7oncash assets (;$"!!! # P'44"!!!% ,4!"!!! P,!"!! Accounts receivable (;$"!!! O P'";,!% ;4"!!
erchandise inventor) '$!"!!!
Prepaid eHpenses ",!! P
,!"!!
*ash invested b) EE ''8"$4!
Total assets of the partnership P
8;8"F,! ,4. d
Total partnership capital (P'!"!!!+$!N% P 8!!"!!!
99-s *apital (P8!!"!!! H 4!N% P ',!"!!!
/ess *ash investment 8!"!!!
erchandise to be invested b) 99 P ;!"!!!
,. a
Adjusted capital of 33:
Total assets (at agreed valuations% P '!"!!!
/ess Accounts pa)able 4"!!! P '8,"!!!
equired capital of33 '!"!!!
*ash tobe invested b) 33 P 4"!!!
0ui.I
'. P,F$"!!! S (P4!"!!! O P,,"!!!% # QP8,4"!!! 5 (P4!"!!! O P,,"!!!%R+8 ,. Philip" P'!!"!!!K a)" P'!!"!!! and Darah" P;!"!!! (P8!!"!!! O P,'!"!!!% 8. P88!"!!!
P88!"!!! S P!"!!! # (P8'!"!!! 5 P8!"!!!%
4
.
c
The capital balances of each partner are determined as
follos:
*ash
P!"!
!!
Propert)
P
!"!!!
ortgage assumed
(8"!!!%
6quipment
P
"!!!
Amount credited to
capital accounts
P!"!
!!
P 4"!!!
P "!!!
. P'"!!! (P';!"!!! O P'$!"!!!% H '+, S P'"!!!$. P'"!!! O the prevailing selling price hich is also the fair market value. F. . P'"!!! P8!"!!! # P!"!!! # P,"!!! S P'!"!!!+8 S P8"!!! P!"!!! 5 P8"!!! S P'"!!! ;. P4"!!! '!. P,,"!!! ''. P8F"!!! S P4!!"!!! O P,"!!! ',. P!"!!! '8. P,!"!!! Pane -ills *ash... P 4!"!!! P 8!"!!! achiner) and equipment... '!!"!!!
Building... 8!"!!! Dubtotal... P'4!"!!! P8!"!!! /ess: /iabilit) assumed b) the partnership... ('!!"!!!% *apital balances" F+'+!$... P'4!"!!! P,!"!!! '4. d Adjusted capital of // P '$";!! *ontributed capital of ,";! Total capital P ,4"! '. a 00" capital: @nadjusted balance P F"!!! Adjustments: Accumulated depreciation ( '"!!%
Alloance for doubtful account (',"!!!%
Adjusted balance P 48"!!
99" capital:
@nadjusted balance P 4;"!!
Adjustments:
Accumulated depreciation ( 4"!!%
Alloance for doubtful account ( 4"!!%
Adjusted balance P 4!"!!
T(3RI-Completion statements:
'. accounting ,. 9AAP
b. prior period adjustments
c. use ofair &or current( values instead of historical cost
d. recognition of goodill in situations not involving business combinations 4. draings
. fair (or current% values
$. achieving equity among the partners F. capital balances . professional corporation True or 4alse
;
0alse
'
4.
True
';
.
0alse
,4
.
0alse
,;
.
0alse
'
!.
True
'
.
0alse
,!
.
True
,
.
True
8!
.
True
'
'.
0alse
'
$.
0alse
,'
.
0alse
,$
.
0alse
'
,.
True
'
F.
0alse
,,
.
True
,F
.
True
'
8.
0alse
'
.
True
,8
.
0alse
,
.
True
Note for the following numbers:
17. Indiidu!ls" p!rtnerships" !nd #orpor!tions !re !llowed to be p!rtners in ! p!rtnership. 1$. %ll of the gener!l p!rtners !re li!ble for !ll the p!rtnership&s debts.
'1. ost sm!ll p!rtnerships m!int!in their n!n#i!l inform!tion using the t!* b!sis.
'+." ,hile the p!rtnership does not p!- in#ome t!*es" it is responsible for other t!*es su#h !s p!-roll t!*es !nd fr!n#hise t!*es.
'. /he propriet!r- theor- is b!sed on the notion th!t the business entit- is !n !ggreg!tion of the owners
'0. /his is !n e*!mple of the propriet!r- theor- of euit-.
'2. %n- b!sis (i.e." #!rr-ing !lue" t!* b!sis" or m!rket !lue) #!n be used to !lue non#!sh !ssets #ontributed to ! p!rtnership