Partnership Formation - Illustrative Problem
.docx
School
Manuel S. Enverga University Foundation - Candelaria, Quezon**We aren't endorsed by this school
Course
ACCOUNTING BSA2
Subject
Accounting
Date
Jan 14, 2025
Pages
2
Uploaded by AgentHeat24292
Illustrative Problem 1A and B each invests 100,000 cash in a new partnership. The journal entry would be:Illustrative Problem 2Assume that X and Y form a partnership. Their investments are as follows:XY - Fair ValueCash 70,000Merchandise Inventory (cost of 10,000)20,000 Computer Equipment (cost of 50,000)30,000Journal entries would be:Illustrative Problem 3F, a sole proprietor has the following records in his books:Cash60,000Accounts Receivable50,000Inventory70,000Equipment40,000Accumulated Depreciation(4,000)Total216,000Accounts Payable86,000F, Capital130,000Total216,000F and G agreed to form a partnership using the books of F. G is to invest 100,000 and the accounts of F is adjusted with the following:I. Allowance for bad debts of 5,000 is to be provided II. Inventory is to be recorded at its market value of 80,000III. The equipment has a fair value of 35,000.IV. 2,000 of accounts payable has not been recordedJournal entries would be:Illustrative Problem 4On January 1, 2021, M and N decide to consolidate their business to form a partnership. The statement of financial position of M and N are as follows:M BooksCash5,000Accounts Receivable10,000Merchandise Inventory8,000Furniture and Fixtures6,000Total29,000Accounts Payable3,000M, Capital26,000Total29,000N BooksCash4,000Accounts Receivable8,000Merchandise Inventory10,000Furniture and Fixtures9,000Total31,000Accounts Payable6,000N, Capital25,000Total31,000
The conditions agreed by the partners for purposes of determining their interests in the partnership are presented below:I. 10% of accounts receivable is to set up as uncollectible in each bookII. Merchandise inventory of N is to be increased by 1,000III. The furniture and fixtures of M and N are to be depreciated by 600 and 900 respectivelyIllustrative Problem 5Cash Investment and Basis for ComputationAs of July 1, 2021, P and S decided to form a partnership. Their balance sheets on this date are:PSCash15,00037,500Accounts Receivable540,000225,000Merchandise Inventory202,500Machinery and Equipment150,000270,000Total705,000735,000Accounts Payable135,000240,000P, Capital570,000S, Capital495,000Total705,000735,000The partners agreed that the machinery and equipment of P is under-depreciated by 15,000 and that of S by 45,000. Allowance for doubtful accounts is to be set up amounting to 120,000 for P and 45,000 for S. The partnership agreement provides for a profit and loss and capital interest of 60% to P and 40% to S. P is to invest cash to bring the partners’ capital balances to their agreed ratio. How much is the adjusted cash after the investment of P?