ACC 1 – FINANCIAL ACCOUNTING AND REPORTING

QUIZ NO. 17 – Partnership Formation (Application)

“Integrity is doing the right thing, even when no one is watching.” – C.S. Lewis

INSTRUCTIONS: Read and analyze carefully the problem given below, and accomplish the
requirements that follow. Use worksheet as answer sheet. Write legibly and avoid erasures. Good luck!

Ms. Ann and Mr. Bouy, who are engaged in the same type of business, agree to combine their
resources and form a partnership on January 1, 2018. The partnership is to be named AB Enterprises.
The statements of financial position of Ms. Ann and Mr. Bouy as of January 1, 2018 are as follows:
Ms. Ann Mr. Bouy
Cash ₱ 50,000 ₱ 120,000
Accounts Receivable 360,000 1,080,000
Inventories 216,000 360,000
Land 1,080,000
Building 900,000
Equipment 90,000 90,000
Accounts Payable 336,000 450,000
A, Capital 1,460,000
B, Capital 2,100,000
The partners agreed to the following:
a. The recoverable amounts of the partners’ respective accounts receivable are ₱300,000 and
₱760,000 for Ms. Ann and Mr. Bouy, respectively
b. The inventory contributed by Mr. Bouy includes obsolete items with a recorded cost of ₱20,000.
c. The land contributed by Ms. Ann has an attached mortgage of ₱180,000. The partnership shall
assume the mortgage.
d. The equipment contributed by Mr. Bouy has a fair value of ₱130,000.
e. Ms. Ann has an unrecorded accounts payable of ₱100,000. The partnership assumes the
obligation of settling that account.

Requirements:
1. Prepare the necessary adjusting entries in the books of Ms. Ann and Mr. Bouy.
2. Prepare the journal entries to close the books of Ms. Ann and Mr. Bouy.
3. Prepare the opening journal entries in the books of the partnership.
4. Prepare a statement of financial position for the new partnership.
---END OF QUIZ NO.17---
“Nothing great was ever achieved without enthusiasm.” – Ralph Waldo Emerson

kikoFARQ17

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