CHAPTER-1 Advance Accounting Solman

Partnership – Basic Considerations and Formation

CHAPTER 1 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 1-1:

a

1-2:

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

1-3:

a

1-4:

Cash Land Mortgage payable

P100,000 300,000 ( 50,000)

Net assets (Julio, 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

b

_120,000

1-5:

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

1-6:

b

1-7:

Reyes

Santos

Cash Inventory Building Equipment Mortgage payable

P200,000 – – 150,000 ________

P300,000 150,000 400,000 ( 100,000)

Net asset (capital)

P350,000

P750,000

AA

BB

CC

P55,000 P55,000

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

2 Chapter 1

1-8:

1-9:

1-10:

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

Maria

Nora

c 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

d Roy

1-11:

1-12:

Sam

Tim

Cash Office Equipment Note payable

P140,000 – ________

– P220,000 _( 60,000)

– – ______

Net asset invested

P140,000

P160,000

P

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

P100,000

a Lara

Mitra

Cash Computer equipment Note payable

P130,000 – ________

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

Net asset invested

P130,000

P240,000

Goodwill (P240,000 - P130,000) =

P110,000

a Perez Cash Office Equipment Merchandise Furniture Notes payable

P 50,000 30,000 – _______

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

–

Net asset invested Partnership – Basic Considerations and Formation

P 80,000

1-12: Continued 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 1-13:

1-14:

P460,000

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

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

1-15:

P230,000

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

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

4 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 1-17:

P248,850

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 1-18:

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

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

P 60,750

Flores' contributed capital (see schedule 2)

__43,500

Additional cash to be invested by Flores

P 17,250

Partnership – Basic Considerations and Formation

1-18: Continued 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 1-19:

P 43,500

d Ortiz

Ponce

Total

( 60%) ( 40%) P133,000 P108,000 P241,000

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

( 2,700) 3,000 _( 2,400)

Adjusted capital balances

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%

1-20:

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

d 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

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

P180,000 __48,000

P132,000

Required capital of Jocson

_180,000

Cash to be invested by Jocson

P 48,000

6 Chapter 1

1-21:

b

1-22:

1-23:

1-24:

1-25:

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 Divino'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 admission of Divino

P211,200

c

a Total assets at fair value Liabilities Capital balance of Flora

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

c 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

c __Rey Contributed capital (assets-liabilities)P471,000 Agreed capital (profit and loss ratio) 382,800 Capital transfer (Bonus) P 88,200

1-26:

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

__Sam_ __Tim __Total_ P291,000 P195,000 P957,000 382,800 191,400 957,000 P(91,800) P 3,600 -

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 of Candy

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

Partnership – Basic Considerations and Formation

1-27:

1-28:

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

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

a 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

1-29:

d

1-30:

b

Zero, because the bonus method involves only a transfer of capital.

Cash Accounts receivable- Net Merchandise inventory Computer equipment Furniture and fixtures Total assets at fair value Accounts payable Net assets invested Agreed capital Goodwill (withdrawal) 1-31:

Bi P 14,000 92,000 150,000 14,000 ---270,000 (72,000) 198,000 200,000 P 2,000

c Cash Office equipment Merchandise inventory Notes payable Contributed capital Agreed capital Bonus to Roxas

1-32:

Noy 10,000 92,000 216,000 24,000 18,000 360,000 (108,000) 252,000 250,000 P (2,000) P

Villar P 2,205,000 630,000 ( 210,000) 2,625,000 2,520,000 P( 105,000)

b Total capital before adjustments (P210,750 + P103,000) Allowance for doubtful accounts Accumulated depreciation (P1,000 – P500) Obsolete inventory Total assets of the partnership

Roxas P

1,575,000 1,575,000 1,680,000 P 105,000 P313,750 ( 10,000) 500 ( 3,500) P300,750

8 Chapter 1

1-33:

b Cash Accounts receivable Merchandise inventory Equipment Accounts payable Notes payable Contributed capital Loss on sale of equipment Net assets Additional investment by Edu Agreed capital

1-34:

1-36:

Edu P136,800 129,600 216,000 (96,000) 386,400 1,800 388,200 20,400 P408,600

Garnett P2,443,364 ( 80,000) ( 108,000) 2,255,364 2,255,364 P -

Bryant P3,097,528 200,000 ( 140,000) 3,157,528 1,503,576* P 1,653,952

a Unadjusted capital Accumulated depreciation Accounts receivable written off Adjusted capital contributed Agreed capital Capital withdrawal

1-35:

Gibo P 19,200 163,200 240,000 60,000 (60,000) (12,000) 410,400 (1,800) 408,600 P408,600

* Total agreed capital (P2,255,364 / 60%) Bryant’s interest Agreed capital of Bryant

P3,758,940 40% P1,503,576

a Total capital Total liabilities Total assets

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

a Unadjusted capital Undervaluation of inventory Allowance for doubtful accounts Accrued expenses Contributed capital Agreed capital of Gordon (P285,000/75%) x 25% Capital withdrawal by Gordon

Gordon P220,000 11,000 (2,750) 228,250 133,250 P 95,000

Fernando P309,375 ( 4,125) (20,250) 285,000 285,000 P -

Partnership – Basic Considerations and Formation

9

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

600

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

200 35 P15 _20 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 Jose Bunag, Capital 15,067.50

15,067.50

Computation: Pedro Castro, Capital (1) P600 P31,400 (2) 200 35 (3) (4) 100 400 (6)

(5) ___800 P1,700

P31,835 P30,135

Jose Bunag, Capital : 1/2 x P30,135 = P15,067.50 10

b.

Chapter 1

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

Partnership – Basic Considerations and Formation

2.

Castro and Bunag Partnership Statement of Financial Position October 1, 2013 Assets

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

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

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

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 12

Chapter 1

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

Agreed Capital

P135,000 28,000 __68,500 P231,500

P137,000 (50%) 68,500 (25%) __68,500 (25%) 274,000

Goodwill 2,000 40,500 _____– 42,500

Total agreed capital (P68,500  25%) = 274,000 Jose, Pedro and Pablo Partnership Statement of Financial Position June 30, 2013 Assets: Cash Accounts receivable (net) Marketable securities Inventory Equipment (net) Goodwill Total

Bonus Method

Goodwill Method

P 49,000 48,000 57,500 85,000 45,000 ______– P284,500

P 49,000 48,000 57,500 85,000 45,000 __42,500 P327,000

P 53,000 115,750 57,875 __57,875 P284,500

P 53,000 137,000 68,500 __68,500 P327,000

Liabilities and Capital: Accounts payable Jose, capital (50%) Pedro, capital (25%) Pablo, capital (25%) Total

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

Partnership Basic Considerations and Formation

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............................................. Total agreed capital..................................................................... Multiply by Carlo Torre's P & L ratio.......................................... Cash to be invested by Carlo Torre.............................................. Problem 1 – 4 a.

Roces' books will be used by the partnership Books of Sales 1. Adjusting Entries

47,250 47,250 P31,500 ___40% P78,750 ___60% P47,250

(a) Sales, Capital........................................................................ Accumulated Depreciation – Fixtures...............................

3,200

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

32,000

3,200 32,000

14

2.

Chapter 1

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.............................................................

4,800 72,000 192,000 3,200 48,000 96,000 32,000 12,800

Accumulated Depreciation – Delivery Equipment....................... Accumulated Depreciation – Fixtures......................................... Accounts Payable........................................................................ Notes Payable............................................................................. Accrued Taxes............................................................................. Sales, Capital..............................................................................

8,000 91,200 64,000 40,000 8,000 224,000

Partnership – Basic Considerations and Formatio

b.

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........................................................................

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

Accrued Taxes............................................................................. Roces, Capital.............................................................................

6,400 224,000

16

c.

Chapter 1

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

Partnership – Basic Considerations and Formation 17

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.................................................................................................. 5,000 Accounts Receivable.......................................................................... 13,000 Merchandise Inventory...................................................................... 12,000 Equipment..........................................................................................3,000 Other Assets....................................................................................... 9,000 Allowance for Bad Debts............................................................. Accounts Payable........................................................................ Notes Payable............................................................................. Accrued Interest Payable............................................................ R. Magno, Capital.......................................................................

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 10,300

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

35,790 23,300 12,490

18

Chapter 1

4.

Lagman and Magno Statement of Financial Position December 31, 2013 Assets Cash................................................................................................... Accounts receivable........................................................................... Less Allowance for bad debts............................................................ Merchandise inventory...................................................................... Equipment......................................................................................... Other assets........................................................................................ Goodwill .......................................................................................... Total Assets.................................................................................

P P34,000 1,210

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

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

2,400

12,000

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

300 900 1,200

Partnership – Basic Considerations and Formation

2.

3.

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

Computation: Toledo, capital (P68,400 – P300)................................................ Divide by Toledo's profit share percentage.................................. Total agreed capital of the partnership......................................... Multiply by Ureta's profit share percentage................................. Agreed capital of Ureta............................................................... Ureta, capital............................................................................... Cash contribution of Ureta.......................................................... or Toledo, capital (P68,400 – P300)................................................ Less Ureta, capital....................................................................... Cash contribution of Ureta..........................................................

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

2,400 16,000 64,700

3,400

P 68,100 ____50% P136,200 ____50% P 68,100 __64,700 P 3,400 P 68,100 __64,700 P 3,400

20

4.

Chapter 1

Toledo and Ureta Partnership Statement of Financial Position July 1, 2013 Assets 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..................................................................................... Total Liabilities and Capital........................................................

P 26,000 2,000 68,100 __68,100 P164,200