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Partnership Formation Take Home Quiz
Partnership Formation Take Home Quiz
ABRAHAM SARAH
Cash 800,000 -
Accounts Receivable 400,000 -
Inventory 640,000 -
Land - 400,000
Building - 960,000
Note Payable 480,000 -
ABRAHAM, Capital 1,360,000 -
SARAH, Capital - 1,360,000
Additional information:
1. If the partners agree that their capital balances to be proportionate to their respective P&L ratios, how
much is to be invested by ABRAHAM if SARAH’s Capital will be the basis?
On June 11, 2011, May and Nora formed a partnership. May is to invest assets at fair value which are yet to be
agreed upon. She is to transfer her liabilities and is to contribute sufficient cash to bring her total capital to P210,000
which is 70% of the total capital of the partnership.
Details regarding the book values of May’s business assets and liabilities and their corresponding valuations are:
2. Nora agrees to invest cash of P42,000 and merchandise valued at current market price. The value of the
merchandise to be invested by (1) Nora and the cash to be invested by (2) May are?