Chapter 1 2013 ed

Partnership – Basic Considerations and Formation

1

CHAPTER 1 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 1-1: a

1-2: b 1-2: c

Jose's capital should be credited for the market value of the computer contributed by him. 60,000. (40,000 + 80,000)  2/3 = 180,000 x 1/3 = 60,000.

1-3: a Cash Land Mortgage payable

P100,000 300,000 ( 50,000)

 Net assets (Julio, capital) capital)

P350,000

Total Capital (P300,000/60%) Perla's interest

P500,000 ______40%

Perla's capital Less:Non-cash asset contributed at market value Land P 70,000 Building 90,000 Mortgage Payable ( 40,000)

P200,000

Cash contribution

P 80,000

1-4: b

1-5: d

_120,000

- Zero, because under under the bonus method, method, a transfer of capital is only required.

1-6: b  Reyes

Santos

Cash Inventory Building Equipment Mortgage payable

P200,000 P300,000  –    150,000  –    400,000 150,000 ________ ( 100,000)

 Net asset (capital)

P350,000

P750,000

 AA

BB

CC 

P55,000 P55,000

1-7: c Cash Property at Market Value Mortgage payable Equipment at Market Value

P 50,000

_______

P 80,000 ( 35,000) _______

Capital

P 50,000

P 45,000

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Chapter 1

1-8: a PP

RR

SS

 

Cash Computer at Market Value

P 50,000 __25,000

P 80,000 _______

P 25,000 __60,000

Capital

P 75,000

P 80,000

P 85,000

1-9: c  Maria

Nora

Cash Merchandise inventory Computer equipment Liability Furniture and Fixtures

P 30,000

200,000

P 90,000 160,000 ( 60,000) ________

Total contribution

P230,000

P190,000

Total agreed capital (P230,000/40%) Nora's interest

P575,000 ______60%

Nora's agreed capital Less: investment

P345,000 190,000

Cash to be invested

P155,000

1-10: d  Roy

Sam

Tim

Cash Office Equipment Note payable

 – P140,000  –    P220,000 ________ _( 60,000)

–   –  ______

Net asset invested

P140,000

P

 Agreed capitals, equally (P300,000/3) =

P100,000

P1 P160,000

1-11: a  Lara

Cash Computer equipment Note payable

P130,000  –  ________

Net asset invested

P130,000

Goodwill (P (P240,000 - P130,000) =

P110,000

Mitra

 

P200,000 50,000 _( 10,000) P2 P240,000

1-12: a Perez

Reyes

Cash Office Equipment Merchandise Furniture Notes payable

P 50,000 30,000  –  _______

P 70,000  –    110,000 100,000 ( 50,000)

 Net asset invested

P 80,000

P230,000

 – 

Partnership – Basic Considerations and Formation

3

 Bonus Method: Total capital (net asset invested)

P310,000

Goodwill Method: Net assets invested Add: Goodwill (P230,000-P80,000)

P310,000 _150,000

Net capital

P460,000

1-13: b Required capital of each partner (P300,000/2) Contributed capital of Ruiz: Total assets P105,000 Less Liabilities __15,000

P150,000

Cash to be contributed by Ruiz

P 60,000

__90,000

1-14: d Total assets: Cash Machinery Building Less: Liabilities (Mortgage payable)

P 70,000 75,000 _225,000

P370,000 __90,000

Net assets (equal to Ferrer's capital account) Divide by Ferrer's P & L share percentage

P280,000 ____70%

Total partnership capital

P400,000

Required capital of Cruz (P400,000 X 30%) Less Assets already contributed: Cash P 30,000 Machinery and equipment 25,000 Furniture and fixtures __10,000

P120,000

Cash to be invested by Cruz

P 55,000

__65,000

1-15: d Adjusted assets of C Borja Cash P 2,500 Accounts Receivable  (P10,000-P500)   9,500 Merchandise inventory  (P15,000-P3,000)  12,000 Fixtures __20,000 Asset contributed by D. Arce: Cash P 20,000 Merchandise __10,000

__30,000

Total assets of the partnership

P 74,000

P 44,000

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Chapter 1

1-16: a Cash to be invested by Mendez: Adjusted capital of Lopez (2/3) Unadjusted capital Adjustments: Prepaid expenses Accrued expenses Allowance for bad debts (5% X P100,000)

P158,400 17,500 ( 5,000) _( 5,000)

Adjusted capital

P165,900

Total partnership capital (P165,900/2/3) Multiply by Mendez's interest

P248,850 ⅓

Mendez's capital Less Merchandise contributed

P 82,950 __50,000

Cash to be invested by Mendez

P 32,950

Total Capital: Adjusted capital of Lopez Contributed capital of Mendez

P165,900 __82,950

Total capital

P248,850

1-17: d Moran, capital (40%) Cash Furniture and Fixtures Divide by Moran's P & L share percentage

P 15,000 _100,000

Total partnership capital Multiply by Nakar's P & L share percentage Required capital of credit of Nakar: Contributed capital of Nakar: Merchandise inventory Land Building Total assets Less Liabilities Required cash investment by Nakar

P115,000 ______40% P287,500 ______60% P172,500

P 45,000 15,000 __65,000 P125,000 __30,000

P 95,000 P 77,500

1-18: c Garcia's adjusted capital (see schedule 1) Divide by Garcia's P & L share percentage

P40,500 ______40%

Total partnership capital Flores' P & L share percentage

P101,250 ______60%

Flores' capital credit Flores' contributed capital (see schedule 2)

P 60,750 __43,500

 Additional cash to be invested by Flores

P 17,250

Partnership – Basic Considerations and Formation

5  

Schedule 1: Garcia, capital: Unadjusted balance Adjustments: Accumulated depreciation Allowance for doubtful account

P 49,500 ( 4,500) ( 4,500)

Adjusted balance

P 40,500

Schedule 2: Flores capital: Unadjusted balance Adjustments: Accumulated depreciation Allowance for doubtful accounts

P 57,000 ( 1,500) ( 12,000)

Adjusted balance

P 43,500

1-19: d Ortiz

Unadjusted capital balances Adjustments: Allowance for bad debts Inventories Accrued expenses Adjusted capital balances

Ponce

Total

( 60%) ( 40%) P133,000 P108,000 P241,000 ( 2,700) 3,000 _( 2,400) P130,900

( 1,800) 2,000 ( 1,600) P106,000

( 4,500) 5,000 ( 4,000) P237,500

Total capital before the formation of the new partnership (see above) P237,500 Divide by the total percentage share of Ortiz and Ponce (50% + 30%) ______80% Total capital of the partnership before the admission of Roxas Multiply by Roxas' interest

P296,875 ______20%

Cash to be invested by Roxas

P 59,375

Merchandise to be invested by Gomez: Total partnership capital (P180,000/60%)

P300,000

Gomez's capital (P300,000 X 40%) Less Cash investment

P120,000 __30,000

 Merchandise to be invested by Gomez

P 90,000

1-20: d

Cash to be invested by Jocson: Adjusted capital of Jocson: Total assets (at agreed valuations) Less Accounts payable Required capital of Jocson Cash to be invested by Jocson

P180,000 __48,000

P132,000 _180,000 P 48,000

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Chapter 1

1-21: b Unadjusted Ell, capital (P75,000  – P5,000) Allowance for doubtful accounts Accounts payable

P 70,000 ( 1,000) ( 4,000)

 Adjusted Ell, capital

P 65,000

Total partnership capital (P113,640/1/3) Less David's capital

P340,920 _113,640

Cortez's capital after adjustments Adjustments made: Allowance for doubtful account (2% X P96,000) Merchandise inventory Prepaid expenses Accrued expenses

P227,280

Cortez's capital before adjustments

P211,200

1-22: c

1,920 ( 16,000) ( 5,200) ___3,200

1-23: a Total assets at fair value Liabilities Capital balance of Flor

P4,625,000 (1,125,000) P3,500,000

Total capital of the partnership (P3,500,000 ÷ 70%) Eden agreed profit & loss ratio Eden agreed capital Eden contributed capital at fair value  Allocated cash to be invested by Eden

P5,000,000 30% 1,500,000 812,000 P 688,000

1-24: c

1-25: c __Rey __Sam_ __Tim __Total_ Contributed capital (assets-liabilities)P471,000 P291,000 P195,000 P957,000 Agreed capital (profit and loss ratio) 382,800 382,800 191,400 957,000 Capital transfer (Bonus) P 88,200 P(91,800) P 3,600 -

1-26: d Total agreed capital (P90,000 ÷ 40%) Contributed capital of Candy (P126,000+P36,000-P12,000) Total agreed capital (P90,000 ÷ 40%) Candy, agreed capital interest Agreed capital of Candy Contributed capital of Candy Withdrawal

P225,000 150,000 225,000 60% 135,000 150,000 P 15,000

Partnership – Basic Considerations and Formation

7  

1-27: a Total agreed capital (210,000 ÷ 70%)  Nora’s interest Agreed capital of Nora Cash invested Cash to be invested by Nora

P300,000 30% P 90,000 42,000 P 48,000

Contributed capital of May (P194,000 - P56,000) Agreed capital of May (P300,000 x 70%) Cash to be invested by May

P138,000 210,000 P 72,000

1-28: a

1-29: c Contributed capital Agreed capital Capital invested

__Alex_ P100,000 92,000 P( 8,000)

_Carlos_ P84,000 92,000 P 8,000

__Total__ P184,000 184,000 -

Contributed capital Agreed capital Capital invested

__Noy P252,000 250,000 P( 2,000)

_Bi _ P198,000 200,000 P 2,000

__Total__ P450,000 450,000 -

Contributed capital Agreed capital Capital invested

__Villar P2,625,000 2,520,000 P (105,000)

_Roxas _ P1,575,000 1,680,000 P 105,000

__Total__ P4,200,000 4,200,000 -_

1-30: b

1-31: c

1-32: b

Assets Adjustments: A B D Total assets:

 Loren P210,750 (5,000) 1,000 (3,500) P203,250

Jamby P103,000 (5,000) (500) _______ P 97,500

Total

P300,750

Partnership – Basic Considerations and Formation

8  

1-33: b

Contributed capital Additional Capital to be invested Agreed Capital

__Gibo P 408,600 --------P 408,600

_Edu _ P 388,200 20,400 P 408,600

__Total__ P 796,800 20,400 P 817,200

1-34: a Contributed capital by Garnett (after adjustments) Divided by capital interest Total Capital of the Partnership Multiplied by Bryant’s Interest Capital balance of Bryant

P2,255,364 60% P3,758,940 40% P1,503,576

Partnership Capital Add: Liablities Total Assets

P3,758,940 4,299,396 P8,058,336

Fernando, Capital after adjustments Divided by 75% Total Capital

P 285,000

Required capital for Gordon (380,000 * 25%) Gordon’s Capital after adjustments Withdrawal of Gordon

P

1-35: a

1-36: a

380,000 95,000 228,250 P(133,250)

Chapter 1

SOLUTIONS TO PROBLEMS Problem 1  –  1 1.

a.  Books of Pedro Castro will be retained by the partnership To adjust the assets and liabilities of Pedro Castro.

1. Pedro Castro, Capital ............................................................. Merchandise Inventory......................................................

600

2. Pedro Castro, Capital ............................................................. Allowance for Bad Debts ..................................................

200

3. Accrued Interest Receivable .................................................. Pedro Castro, Capital.........................................................

35

Computation: P1,000 x 6% x 3/12 = P2,000 x 6% x 2/12 =

600

200

35

P15 _20

Total ......................... ......P35 4. Pedro Castro, Capital ............................................................. Accrued Interest Payable................................................... (P4,000 x 5% x 6/12 = P100)

100

5. Pedro Castro, Capital ............................................................. Accumulated Depreciation  – Furniture and Fixtures ........

800

6. Office Supplies ...................................................................... Pedro Castro, Capital.........................................................

400

100

800

400

To record the investment of Jose Bunag.

Cash.. ........................................................................................... 15,067.50 Jose Bunag, Capital ............................................................... Computation:

Pedro Castro, Capital P600 P31,400 (1) 200 35 (3) (2) 100 400 (6) (4) (5)   ___800 P1,700

P31,835 P30,135

Jose Bunag, Capital : 1/2 x P30,135 = P15,067.50

15,067.50

Partnership – Basic Considerations and Formation

b.

9

 A new set of books will be used  Books of Pedro Castro To adjust the assets and liabilities.

See Requirement (a). To close the books.

Notes Payable............................................................................... Accounts Payable ......................................................................... Accrued Interest Payable.............................................................. Allowance for Bad Debts ............................................................. Accumulated Depreciation  – Furniture and Fixtures ................... Pedro Castro, Capital ................................................................... Cash....................................................................................... Notes Receivable................................................................... Accounts Receivable ............................................................. Accrued Interest Receivable.................................................. Merchandise Inventory .......................................................... Office Supplies ...................................................................... Furniture and Fixtures............................................................

4,000 10,000 100 1,200 1,400 30,135 6,000 3,000 24,000 35 7,400 400 6,000

New Partnership Books To record the investment of Pedro Castro.

Cash ........................................................................................... Notes Receivable.......................................................................... Accounts Receivable.................................................................... Accrued Interest Receivable......................................................... Merchandise Inventory................................................................. Office Supplies............................................................................. Furniture and Fixtures .................................................................. Notes Payable ........................................................................ Accounts Payable................................................................... Accrued Interest Payable....................................................... Allowance for Bad Debts....................................................... Accumulated Depreciation  – Furniture and Fixtures............. Pedro Castro, Capital.............................................................

6,000 3,000 24,000 35 7,400 400 6,000 4,000 10,000 100 1,200 1,400 30,135

To record the investment of Jose Bunag.

Cash.. ........................................................................................... 15,067.50 Jose Bunag, Capital ...............................................................

15,067.50

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Chapter 1

2.

Castro and Bunag Partnership Balance Sheet October 1, 2013  A s s e t s

Cash ..... ...... ... ........................................................................................... Notes receivable .......................................................................................... Accounts receivable .................................................................................... P 24,000 Less Allowance for bad debts...................................................................... ___1,200 Accrued interest receivable ......................................................................... Merchandise inventory ................................................................................ Office supplies ........................................................................................... Furniture and fixtures .................................................................................. 6,000 Less Accumulated depreciation................................................................... ___1,400 Total Assets ........................................................................................

P21,067.50 3,000.00 22,800.00 35.00 7,400.00 400.00 __4,600.00 P59,302.50

 Liabilities and Capital

Notes payable ........................................................................................... Accounts payable ........................................................................................ Accrued interest payable ............................................................................. Pedro Castro, Capital................................................................................... Jose Bunag, Capital .....................................................................................

P 4,000.00 10,000.00 100.00 30,135.00 _15,067.50

Total Liabilities and Capital ...............................................................

P59,302.50

Problem 1 –  2 Contributed Capitals:

Jose:

Capital before adjustment...................................................... P 85,000 Notes Payable ........................................................................ 62,000 Undervaluation of inventory.................................................. 13,000 Underdepreciation.................................................................. ( 25,000) Pedro: Cash....................................................................................... Pablo: Cash ....................................................................................... 11,000 Marketable securities............................................................. _57,500 Total contributed capital..............................................................................  Agreed Capitals:  Bonus Method: Jose (P231,500 x 50%)................................................................. P115,750 Pedro (P231,500 x 25%) .............................................................. 57,875 Pablo (P231,500 x 25%)......................... ...................................... __57,875

Total . ........................................................................................... P231,500

P 135,000 28,000 ___68,500 P 231,500

Partnership – Basic Considerations and Formation

11

Goodwill Method . To have a goodwill, the only possible base is the capital of Pablo. The computation is: Contributed Capital

Jose Pedro Pablo

P135,000 28,000 __68,500

Total

P231,500

Agreed   Capital

Goodwill

P137,000 (50%) 68,500 (25%) __68,500 (25%)

2,000 40,500 _____ – 

274,000

42,500

Total agreed capital (P68,500  25%) = 274,000 Jose, Pedro and Pablo Partnership Balance Sheet June 30, 2013  Bonus Method

Assets: Cash Accounts receivable (net) Marketable securities Inventory Equipment (net) Goodwill Total

P 49,000 48,000 57,500 85,000 45,000 ______ – 

Goodwill Method 

 

P 49,000 48,000 57,500 85,000 45,000 __42,500

P284,500

P327,000

Accounts payable Jose, capital (50%) Pedro, capital (25%) Pablo, capital (25%)

P 53,000 115,750 57,875 __57,875

P 53,000 137,000 68,500 __68,500

Total

P284,500

P327,000

Liabilities and Capital:

Problem 1 –  3 1.

 Books of Pepe Basco

To adjust the assets. a.

Pepe Basco, Capital...................................................................... Estimated Uncollectible Account ..........................................

3,200

b. Pepe Basco, Capital...................................................................... Accumulated Depreciation  – Furniture and Fixtures.............

500

3,200

500

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Chapter 1

To close the books. Estimated Uncollectible Account ....................................................... Accumulated Depreciation  – Furniture and Fixtures.......................... Accounts Payable................................................................................ Pepe Basco, Capital ............................................................................ Cash.. ........................................................................................... Accounts Receivable.................................................................... Merchandise Inventory................................................................. Furniture and Fixtures.................................................................. 2.

4,800 1,500 3,600 31,500 400 16,000 20,000 5,000

 Books of the Partnership

To record the investment of Pepe Basco. Cash .... ... ........................................................................................... Accounts Receivable .......................................................................... Merchandise Inventory....................................................................... Furniture and Fixtures......................................................................... Estimated Uncollectible account.................................................. Accumulated Depreciation  – Furniture and Fixtures . .................. Accounts Payable......................................................................... Pepe Basco, Capital......................................................................

400 16,000 20,000 5,000 4,800 1,500 3,600 31,500

To record the investment of Carlo Torre. Cash .... ... ........................................................................................... Carlo Torre, Capital ..................................................................... Computation: Pepe Basco, capital (Base) ........................................................... Divide by Pepe Basco's P & L ratio .............................................

47,250 47,250

P31,500 ___40%

Total agreed capital ...................................................................... P78,750 Multiply by Carlo Torre's P & L ratio.......................................... ___60% Cash to be invested by Carlo Torre ..............................................

P47,250

Problem 1 –  4 a.

 Roces' books will be used by the partnership  Books of Sales

1. Adjusting Entries (a) Sales, Capital ......................................................................... Accumulated Depreciation  – Fixtures ...............................

3,200

(b) Goodwill................................................................................ Sales, Capital.....................................................................

32,000

3,200

32,000

Partnership – Basic Considerations and Formation

2.

13

Closing Entry Allowance for Bad Debts ............................................................. Accumulated Depreciation  – Delivery Equipment ...................... Accumulated Depreciation  – Fixtures.......................................... Accounts Payable ......................................................................... Notes Payable............................................................................... Accrued Taxes.............................................................................. Sales, Capital................................................................................ Cash....................................................................................... Accounts Inventory................................................................ Merchandise Inventory .......................................................... Prepaid Insurance................................................................... Delivery Equipment............................................................... Fixtures .................................................................................. Goodwill................................................................................

12,800 8,000 91,200 64,000 40,000 8,000 224,000 4,800 72,000 192,000 3,200 48,000 96,000 32,000

 Books of Roces (Books of the Partnership)

1.

2.

Adjusting Entries (a) Roces, Capital .............................................................................. Allowance for Bad Debts.......................................................

1,600

(b) Accumulated Depreciation  – Fixtures.......................................... Roces, Capital........................................................................

16,000

(c) Merchandise Inventory................................................................. Roces, Capital........................................................................

8,000

(d) Goodwill....................................................................................... Roces, Capital........................................................................

40,000

1,600

16,000

8,000

40,000

To record the investment of Sales. Cash .... ... ........................................................................................... Accounts Receivable .......................................................................... Merchandise Inventory....................................................................... Prepaid Insurance................................................................................ Delivery Equipment............................................................................ Fixtures ... ........................................................................................... Goodwill . ........................................................................................... Allowance for Bad Debts ............................................................. Accumulated Depreciation  – Delivery Equipment ...................... Accumulated Depreciation  – Fixtures.......................................... Accounts Payable......................................................................... Notes Payable............................................................................... Accrued Taxes.............................................................................. Sales, Capital................................................................................

4,800 72,000 192,000 3,200 48,000 96,000 32,000 12,800 8,000 91,200 64,000 40,000 8,000 224,000

14

b.

Chapter 1

Sales' books will be used by the partnership  Books of Roces

1. Adjusting Entries See Requirement (a). 2. Closing Entry Allowance for Bad Debts ............................................................. Accumulated Depreciation  – Delivery Equipment ...................... Accumulated Depreciation  – Fixtures.......................................... Accounts Payable ......................................................................... Accrued Taxes.............................................................................. Roces, Capital .............................................................................. Cash....................................................................................... Accounts Receivable ............................................................. Merchandise Inventory .......................................................... Prepaid Insurance................................................................... Delivery Equipment............................................................... Fixtures.................................................................................. Goodwill................................................................................

1,600 12,800 64,000 104,000 6,400 224,000 14,400 57,600 132,800 4,800 19,200 144,000 40,000

 Books of Sales (Books of the Partnership)

1.

Adjusting Entries See Requirement (a).

2.

To record the investment of Roces. Cash .... ... ........................................................................................... Accounts Receivable .......................................................................... Merchandise Inventory....................................................................... Prepaid Insurance................................................................................ Delivery Equipment............................................................................ Fixtures ... ........................................................................................... Goodwill . ........................................................................................... Allowance for Bad Debts ............................................................. Accumulated Depreciation  – Delivery Equipment ...................... Accumulated Depreciation  – Fixtures.......................................... Accounts Payable......................................................................... Accrued Taxes.............................................................................. Roces, Capital ..............................................................................

14,400 57,600 132,800 4,800 19,200 144,000 40,000 1,600 12,800 64,000 104,000 6,400 224,000

Partnership – Basic Considerations and Formation

c.

15  

 A new set of books will be opened by the partnership  Books of Roces

1. Adjusting Entries See Requirement (a). 2. Closing Entry

See Requirement (b).  Books of Sales

1. Adjusting Entries See Requirement (a). 2. Closing Entry See Requirement (a).  New Partnership Books

To record the investment of Roces and Sales. Cash .... ... ........................................................................................... Accounts Receivable .......................................................................... Merchandise Inventory....................................................................... Prepaid Insurance................................................................................ Delivery Equipment (net) ................................................................... Fixtures (net)....................................................................................... Goodwill ........................................................................................... Allowance for Bad Debts ............................................................. Accounts Payable......................................................................... Notes Payable............................................................................... Accrued Taxes.............................................................................. Roces, Capital .............................................................................. Sales, Capital................................................................................

19,200 129,600 324,800 8,000 46,400 84,800 72,000 14,400 168,000 40,000 14,000 224,000 224,000

16

Chapter 1

Problem 1 –  5

1.

To close Magno's books. Allowance for Bad Debts.................................................................... Accounts Payable................................................................................ Notes Payable ..................................................................................... Accrued Interest Payable .................................................................... R. Magno, Capital............................................................................... Cash.. ........................................................................................... Accounts Receivable.................................................................... Merchandise Inventory................................................................. Equipment .................................................................................... Other Assets.................................................................................

2.

5,000 13,000 12,000 3,000 9,000

To adjust the books of Lagman. Goodwill . ........................................................................................... Allowance for Bad Debts ............................................................. J. Lagman, Capital........................................................................

3.

1,000 6,000 10,000 300 24,700

8,000 210 7,790

To record the investment of Magno. Cash .... ... ........................................................................................... Accounts Receivable .......................................................................... Merchandise Inventory....................................................................... Equipment........................................................................................... Other Assets........................................................................................ Allowance for Bad Debts ............................................................. Accounts Payable......................................................................... Notes Payable............................................................................... Accrued Interest Payable.............................................................. R. Magno, Capital ........................................................................

5,000 13,000 12,000 3,000 9,000 1,000 6,000 10,000 300 24,700

To adjust the investments of the partners. Cash .... ... ........................................................................................... R. Magno, Capital ........................................................................ (P35,000 –  P24,700 = P10,300)

10,300

J. Lagman, Capital .............................................................................. Cash.. ........................................................................................... Accounts Payable to J. Lagman ................................................... (P63,000 + P7,790 = P70,790  –  P35,000 = P35,790)

35,790

10,300

23,300 12,490

Partnership – Basic Considerations and Formation

4.

17  

Lagman and Magno Balance Sheet December 31, 2013  A s s e t s

Cash.... ... ........................................................................................... Accounts receivable............................................................................ Less Allowance for bad debts............................................................. Merchandise inventory ....................................................................... Equipment........................................................................................... Other assets......................................................................................... Goodwill ...........................................................................................

P  –  P34,000 1,210

Total Assets..................................................................................

32,790 21,000 8,000 46,000 ___8,000 P115,790

 Liabilities and Capital

Accounts payable................................................................................ Notes payable...................................................................................... Accrued interest payable..................................................................... Accounts payable to J. Lagman .......................................................... J. Lagman, capital ............................................................................... R. Magno, capital................................................................................

P 18,000 15,000 300 12,490 35,000 __35,000

Total Liabilities and Capital.........................................................

P115,790

Problem 1 –  6 1.

 Books of Toledo

Toledo, Capital............................................................................. Allowance for Bad Debts (15% x P32,000) ..........................

4,800 4,800

 Books of Ureta

Ureta, Capital ............................................................................... Allowance for Bad Debts (10% x P24,000) ..........................

2,400

Cash (90% x P12,000) .................................................................. Loss from Sale of Office Equipment............................................ Office Equipment...................................................................

10,800 1,200

Toledo, Capital (1/4 x P1,200) ..................................................... Ureta, Capital ............................................................................... Loss from Sale of Office Equipment .....................................

300 900

2,400

12,000

1,200

18

2.

3.

Chapter 1

 New Partnership Books

Cash.. ........................................................................................... Accounts Receivable.................................................................... Merchandise ................................................................................. Office Equipment......................................................................... Allowance for Bad Debts....................................................... Accounts Payable................................................................... Notes Payable ........................................................................ Toledo, Capital ...................................................................... To record the investment of Toledo.

3,200 32,000 40,000 10,000

Cash.. ........................................................................................... Accounts Receivable.................................................................... Merchandise ................................................................................. Toledo, Capital............................................................................. Allowable for Bad Debts....................................................... Accounts Payable................................................................... Ureta, Capital......................................................................... To record the investment of Ureta.

22,800 24,000 36,000 300

Cash .... ... ........................................................................................... Ureta, Capital ............................................................................... To record Ureta's cash contribution.

3,400

4,800 10,000 2,000 68,400

2,400 16,000 64,700

Computation: Toledo, capital (P68,400  –  P300)................................................. P 68,100 Divide by Toledo's profit share percentage.................................. ____50%

Total agreed capital of the partnership......................................... P136,200 Multiply by Ureta's profit share percentage ................................. ____50% Agreed capital of Ureta ................................................................ P 68,100 Ureta, capital ................................................................................ __64,700 Cash contribution of Ureta ........................................................... P 3,400 or  Toledo, capital (P68,400  –  P300)................................................. P 68,100 Less Ureta, capital........................................................................ __64,700 Cash contribution of Ureta ........................................................... P 3,400

3,400

Partnership – Basic Considerations and Formation

4.

19

Toledo and Ureta Partnership Balance Sheet July 1, 2013  A s s e t s

Cash .... ... ........................................................................................... Accounts receivable............................................................................ Less Allowance for bad debts............................................................. Merchandise........................................................................................ Office equipment ................................................................................ Total Assets..................................................................................

P 29,400 P56,000 __7,200

48,800 76,000 __10,000 P164,200

 Liabilities and Capital

Accounts payable................................................................................ Notes payable...................................................................................... Toledo, capital .................................................................................... Ureta, capital.......................................................................................

P 26,000 2,000 68,100 __68,100

Total Liabilities and Capital.........................................................

P164,200