Solution Chapter 1 Dayag

Chapter 1 Problem I Requirement 1:  Assuming that A and B agree that each partner is to receive a capital credit equal to the agreed values of the net assets each partner invested: To record adjustments: adjustm ents:  nothing to adjust since both of them have no set of books. To close the books:  nothing to close since both of them have no set of books. To record investments: Partnership Partnership books: Cash………………………………………………………………………………. 120,000 Inventory…………………………………………………………………………. 120,000 Equipment……………………………………………………………………….. 240,000  A, capital………………………………………………………………. capital………………………………………………………………... .. 480,000 Initial investment. Cash……………………………………………………………………………….. 120,000 Lan……………………………………………………………………………….. 240,000 !uilin"……………………………………………………………………………. 480,000 #ort"a"e paya$le……………………………………………………. paya$le……………………………………………………. 240,000 !, capital……………………………………………………………… capital……………………………………………………………….. .. %00,000 Initial investment. Requirement 2:  Assuming that A and B agree that each partner is to receive an equal capital interest. To record adjustments:  nothing to adjust since both of them have no set of books. To close the books:  nothing to close since both of them have no set of books. To record investments: Partnership Partnership books: Bonus Approach: Cash…………………………………………………………………………… Cash………………………… ………………………………………………… 120,000 Inventory……………………………………………………………………… 120,000 Equipment……………………………………………………………………. 240,000  A, capital……………………………………………………………. capital……………………………………………………………... 480,000 Cash…………………………………………………………………………… 120,000 Lan……………………………………………………………………………. 240,000 !uilin"………………………………………………………………………… 480,000 #ort"a"e paya$le………………………………………………… paya$le………………………………………………… 240,000 !, capital.………………………………………………………. capital.……………………………………………………….…… …… %00,000 !, capital…………………………………………………………………… capital……………………………………………………………………….. ….. %0,000  A, capital……………………………………………………………… capital……………………………………………………………… %0,000

Total agreed capital (P4!"!!! # P$!!"!!!%&.P P$!!"!!!% &.P '"!!"!!! ultiplied b): *apital interest (equal%&&&... (equal%&&& ... '+, Partner-s individual capital interest&&&&&.P interest&&&& &.P 4!"!!! /ess: A-s capital interest&&&&&&&&&..&. interest&&&&&&&&&..&. 4!"!!! Bonus to A&&.&&&&&&&&&& A&&.&&&&&&&&&&&&&&..P &&&&..P $!"!!!

Revaluation !ood"ill# Approach:

Cash…………………………………………………………………………… 120,000 Inventory……………………………………………………………………… 120,000 Equipment……………………………………………………………………. 240,000  A, capital…………………………………………………………….. 480,000 Cash…………………………………………………………………………… 120,000 Lan……………………………………………………………………………. 240,000 !uilin"………………………………………………………………………... . 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 *ash 6quipment  Total assets 7ote pa)able assumed b) partnership 7et assets invested 1$ Bonus %ethod

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2nvested b) 3ohn P'!!"!!! '!!"!!! 555 P'!!"!!!

2nvested b) 3e 555 P ''!"!!! P ''!"!!! 8!"!!! P !"!!!

2nvested b) 3ane 555 555 ! 555 P !

*ash

'!!"!!

2$ !ood"ill %ethod Revaluation o& Asset# *ash '!!"!!! 6quipment ''!"!!!

6quipment

''!"!!

9oodill

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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 recognis capital account.  The goodill method is used hen the partners recogni