Reiner has a “Ganda Ka?

Salon” in Cavite and Mae has a

“Perfect Salon” in Tagaytay. After a year of operation,
Reiner decided to join Mae and form a “MIO Salon”
together. The following are their balance sheets as of
January 10, 2017.

Ganda Ka? Salon

Statement of Financial Position
as of January 10, 2017
ASSETS
Cash Php 75,000
Accounts Receivables 10,000
Merchandise Inventory 17,000
Furniture and Fixtures 9,000
Total Assets Php 111,000

LIABILITIES AND OWNER’S EQUITY

Accounts Payable Php 21,000
Reiner, Capital 90,000
Total Liabilities and Php 111,000
Owner’s Equity
1. Reiner will invest his business subject to the following
condition:
A.) Write off 10% of accounts receivable.
B.) Obsolete merchandise should be written off
amounting of 7,000.
C.) Furniture and Fixtures should cost 7,000 as per
agreement of the partners.
D.) Reiner’s interest should be 70,000 so that he must
make additional investment/ withdrawal to make his
capital contribution equal to the agreed interest.

Required: Prepare journal entries for the adjustment

and prepare closing entries for Reiner’s Ganda Ka?
Salon.

Perfect Salon
Statement of Financial Position
as of January 10, 2017
ASSETS
Cash Php 90,000
Accounts Receivables 20,000
Merchandise Inventory 17,000
Furniture and Fixtures 40,000
Total Assets Php 167,000

LIABILITIES AND OWNER’S EQUITY

Accounts Payable Php 37,000
Mae, Capital 130,000
Total Liabilities and Php 167,000
Owner’s Equity

2. Mae net contribution should be adjusted to the

following:
A.) 19% should be written off to Mae’s accounts
receivable.
B.) Her obsolete merchandise amounting to 5,000 should
be written off.
C.) Her furniture and fixtures should cost 32,000 as per
agreement with Reiner.
D.) Her books will still be used by their partnership.
Required: Prepare journal entries of adjustments in
Mae’s book and prepare entries in the Mae and Reiner’s
partnership book.