Problem #1

Partner’s Original Investment

Froilan Labausa contributed land, inventory, and P280000 cash to a partnership. The land has a book value of P650000
and a market value of P1350000. The inventory has a book value of P600000 and a market value of P510,000. The
partnership also assumed a P350000 note payable owned by Labausa that was used to purchase the land. Rosalie Balhag
agreed to put up cash equivalent to Labausa’s net investment.

Required:

Prepare the journal entry to record Labausa’s and Balhag’s investment in the partnership.

*Froilan Labausa
Cash 280000
Land 1350000
Inventory 510000
Notes Payable 350000
Labausa, Capital 1790000

*Rosalie Balhag
Cash 1790000
Balhag, Capital 1790000