Assignment 1

Partnership formation

Instruction: Prepare the answers in written form using a clean paper (e.g. Yellow pad, bond paper,
notebook etc.) and submit a snapshot in CANVAS.

PROBLEM 1 On April 1, 2019, Odette and Lance formed a partnership with each contributing the
following assets:

Odette Lance

Cash 120,000 80,000

Machinery and equipment 100,000 300,000
Building 900,000
Furniture and fixtures 40,000

The building is subject to a mortgage loan of 320,000, which is to be assumed by the partnership.

Required: Prepare the journal entries for the investment of partners

PROBLEM 2 Carmilla and Cecilion are forming a partnership by combining their businesses. Their books
show the following:

Carmilla Cecilion

Cash 72,000 30,000

Account receivable 150,000 108,000
Merchandise inventory 240,000 156,000
Furnitures and fixtures 330,000 102,000
Prepaid expenses 63,000 21,000
Accounts payable 366,000 144,000
Carmilla, capital 489,000
Cecilion, capital 273,000

It has been agreed to recognize uncollectible accounts of P7,500 and P5,400 to each party, respectively
and that the furniture and fixtures of Cecilion are overdepreciated by P9,000. Each partner’s share of
equity is to be equal to the net assets invested.

Required:

a. Prepare the journal entries for the investment and adjustments

b. What is the total capital of Carmilla and Cecilion?
 Assignment 1
Partnership formation

PROBLEM 3 A business owned by Kagura was short of cash and Kagura decided to form a partnership
with Gusion who was able to contribute cash twice the interest of Kagura in the new partnership. The
assets contributed by Kagura appears as follows in the statement of financial position of his business:
cash, P9,000; accounts receivable, P189,000 with allowance for uncollectible accounts of P6,000;
merchandise inventory, P420,000; and store equipment, P150,000 with accumulated depreciation of
P15,000.

Kagura and Gusion agreed that the allowance for uncollectible accounts was inadequate and should be
P10,000. They also agreed that the fair value for the inventory is P460,000 and for the store equipment
is P140,000.

Required:

1. Journal entry for the adjustments and investments

2. What is the total capital of Kagura and Gusion?

PROBLEM 4 Hilda and TIgreal are combining their separate business to form a partnership. Cash and
non-cash assets are to be contributed for a total capital of P600,000. The non-cash assets to be
contributed and the liabilities to be assumed are as follows:

Hilda Tigreal

BV FV BV FV

Accounts receivable 40,000 40,000

Merchandise inventory 60,000 100,000 40,000 50,000
Equipment 120,000 90,000 80,000 100,000
Accounts payable 30,000 30,000 20,000 20,000

Partners’ capital accounts are to be equal after all the contribution of assets and the assumption of
liabilities.

Required:

a. How much is the cash to be contributed by Hilda?

b. How much is the total assets of the partnership?