(NUMBER 8)

GIVEN:
BRUCE: Agreed Value BRUCE
Accounts Receivable 30,000 Assets:
Inventory 138,000 Accounts Receivable
Equipment 240,000 Inventory
Accounts Payable 200,000 Equipment
Notes Payable 14,000
Liabilities and Equity:
RACHEL: Agreed Value Accounts Payable
Inventory 146,500 Notes Payable
Cash 93,500 Capital
Capital 240,000

SOLUTION:
a. Prepare two journal entries to set up the partnership.

BRUCE AND RACHEL PARTNERSHIP BOOKS

Jul 1 Cash 166,000
Accounts Receivable 30,000
Inventory 138,000
Equipment 240,000 ⬅ BRUCE'S INVESTMENT
Accounts Payable 200,000
Notes Payable 14,000
Bruce, Capital 360,000

Cash 146,500
Inventory 93,500 ⬅ RACHEL'S INVESTMEN
Rachel, Capital 240,000

b. Prepare a statement of financial position for the partnership as at July 1 just after f

Bruce and Rachel Partnership

Statement of Financial Position
July 1, 2016
Amounts in Philippine Peso

ASSETS
Current Assets
Cash 312,500
Accounts Receivable 30,000
Inventory 231,500 574,000
Non-current Assets
 Equipment 240,000
Total Assets 814,000

LIABILITIES AND EQUITY

Current Liabilities
Accounts Payable 200,000
Notes Payable 14,000 214,000
Partners' Equity
Bruce, Capital 360,000
Rachel, Capital 240,000 600,000
Total Liabilities and Equity 814,000

c. Profit (before interest and salaries) on Dec. 31 was P120,500. Cash withdrawals ma
P30,000 and P40,000, respectively. Prepare a profit distribution table and one entry to

BRUCE RACHEL TOTAL

6% interest on capital 21,600 14,400 36,000
Salaries 30,000 30,000 60,000 ⬅ PROFIT DISTRIBUTION
Remainder 1:1 12,250 12,250 24,500
Total 63,850 56,650 120,500

Dec 31 Income Summary 120,500

Bruce, Drawings 63,850 ⬅ ENTRY
Rachel, Drawings 56,650

d. Set up the general ledger (T Accounts) accounts to show each partner's equity.

Bruce, Capital Rachel, Capital

360,000 240,000
360,000 240,000

Bruce, Drawings Rachel, Drawings

30,000 63,850 40,000 56,650
33,850 4,000
44,000 56,650
12,650

e. Prepare a statement of changes in partners' equity.

Bruce and Rachel Partnership

Statement of Changes in Partners' Equity
For the Year Ended December 31, 2016
 Amounts in Philippine Peso

Bruce Rachel Total

Capital, July 1 360,000 240,000 600,000
Share in Net Income 63,850 56,650 120,500
Personal Drawings (30,000) (44,000) (74,000)
Capital, December 31 393,850 252,650 646,500
 Agreed Capital % of Total Amount
Rachel's Investment 40 240,000
30,000 Bruce's Investment 60 360,000
138,000 Total Investment 100 600,000
240,000
408,000 BRUCE
Agreed Capital 360,000
200,000 Current Contribution 194,000
14,000 Additional Cash Investment 166,000
194,000
408,000

BRUCE'S INVESTMENT

RACHEL'S INVESTMENT

at July 1 just after formation.

ash withdrawals made by Bruce and Rachel amounted to
ble and one entry to record the distribution.

PROFIT DISTRIBUTION TABLE

partner's equity.

, Capital
240,000
240,000

Drawings
56,650

56,650
12,650
(NUMBER 9)
Refer to Exercise 8. The following year the business earned P250,000 with cash withdrawn by the p
Direction: Requirements c, d, and e of Exercise 8.

SOLUTION:

c. Profit (before interest and salaries) on Dec. 31 was P250,000. Cash withdrawals ma
to P50,000 and P60,000, respectively. Prepare a profit distribution table and one entry

BRUCE RACHEL TOTAL

12% interest on capital 43,200 28,800 72,000
Salaries 60,000 60,000 120,000 ⬅ PROFIT DISTRIBU
Remainder 1:1 29,000 29,000 58,000
Total 132,200 117,800 250,000

Dec 31 Income Summary 250,000

Bruce, Drawings 132,200 ⬅ ENTRY
Rachel, Drawings 117,800

d. Set up the general ledger (T Accounts) accounts to show each partner's equity.

Bruce, Capital Rachel, Capital

393,850 252,650
393,850 252,650

Bruce, Drawings Rachel, Drawings

50,000 132,200 60,000 117,800
82,200 57,800

e. Prepare a statement of changes in partners' equity.

Bruce and Rachel Partnership

Statement of Changes in Partners' Equity
For the Year Ended December 31, 2017
Amounts in Philippine Peso

Bruce Rachel Total

Capital, January 1 393,850 252,650 646,500
Share in Net Income 132,200 117,800 250,000
Personal Drawings (50,000) (60,000) (110,000)
Capital, December 31 476,050 310,450 786,500
withdrawn by the partners as follows: P50,000 by Bruce and P60,000 by Rachel.

withdrawals made by Bruce and Rachel amounted

ble and one entry to record the distribution.

PROFIT DISTRIBUTION TABLE

ner's equity.

, Capital
252,650
252,650

Drawings
117,800
57,800