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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

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