PROBLEM 3: Two Sole Proprietors form a partnership.

On January 1, 2015, B. Maramba and S. Zaragosa agreed to combine their proprietorships as

a partnership. The partnership would be called Nonstop Computer Shop. Their statement of
financial position as at December 31, 2014 is as follows:
B. S. Zaragosa
Maramba
Cash P 15,000 P 130,000
Accounts Receivable 80,000 150,000
Inventories 200,000 235,000
Prepaid Rent - 5,000
Land 180,000 -
Building 250,000 -
Accumulated Depreciation (75,000) -
Computer Equipment 450,000 600,000
Accumulated Depreciation (270,000) (360,000)
Total Assets P 830,000 P 760,000

Accounts Payable P 150,000 P 60,000

Mortgage Payable 75,000 -
B. Maramba, Capital 605,000 -
S. Zaragosa, Capital - 700,000
Total Liabilities & Partner’s Capital P 830,000 P 760,000

The partners have agreed to affect the following adjustments:

a. Accounts receivable of B. Maramba is estimated to be 90% realizable.

b. Accounts receivable of S. Zaragosa is estimated to be 80% realizable.
c. Inventory of B. Maramba is to be decreased by P 15,000.
d. Land has a fair value of P 185,000.
e. All the other assets and liabilities are to be transferred at their net book values.
Required:
1. Prepare the journal entries in the Books of B. Maramba and S. Zaragosa. (Adjusting Entries &
Closing Entries)
2. Prepare the journal entries in the Books of Partnership (To record the investment)
3. Prepare the partnership’s statement of financial position as at the date of formation of the
partnership.
PROBLEM 4
As of November 10, 2014, M. Melendez and J. Valdez decided to form a partnership. Their balance
sheets on this date are:

M. Melendez J. Valdez

Cash P15,000 P37,500

Accounts Receivable 540,000 225,000

Merchandise Inventory - 202,500

Machinery and Equipment 150,000 270,000

Total P705,00 P735,000

0

Accounts Payable P135,00 P240,000

0

M. Melendez, Capital 570,000 -

J. Valdez, Capital - 495,000

Total P705,00 P735,000

0

The partners agreed that the machinery and equipment of M. Melendez is under depreciated by P
15,000 and that of J. Valdez by P 45,000. Allowance for doubtful accounts is to be set up amounting
to P 120,000 for M. Melendez and P 45,000 for J. Valdez.
Instructions:
1. Give the adjusting entries to adjust the accounts of M. Melendez and J. Valdez.
2. Compute for the net investment of each partner to the partnership.
3. Prepare a compound entry to record their investments to the new partnership books.
4. Prepare the statement of financial position of MV partnership after the formation.