ARAÑEZ ACCOUNTING ADVANCE

PARTNERSHIP: FORMATION Problem 3

Prepared by: Rañer S. Arañez, CPA Faker, Girlie, and How are best friends since
kindergarten. One day, they decided to form FGH
Problem 1 Partnership. Their contributions are as follows:
Andrew, Brad, and Cory are best friends since birth. One Faker Girlie How
day, they decided to form ABC Partnership. Their Cash P110,000 P55,000
contributions are as follows: Inventory P50,000
Andrew Brad Cory Delivery Truck P150,000
Cash P100,000 P45,000 Mortgage Liability* P70,000
Inventory P50,000 *The mortgage liability is related to the Delivery truck.
Delivery Truck P150,000 The partners decided to assume the liability.
Mortgage Liability* P60,000
*The mortgage liability is related to the Delivery truck. The partners’ Interest ratio is 4:3:3, respectively.
The partners decided to assume the liability.
Required:
Required: 1. Compute for the Total Contributed Capital of
1. Compute for the Total Contributed Capital of each partner.
each partner. 2. Compute for the amount credited to each
2. Compute for the amount credited to each partner.
partner. 3. Journalize the formation of the partnership.
3. Journalize the formation of the partnership.
Problem 4
Problem 2 Irish is a businesswoman who decided to form a
Dell is a businessman who decided to form a partnership partnership with her friend Jill, an owner of a sole
with his friend Elle, an owner of a sole proprietorship proprietorship restaurant. Irish will contribute cash in
restaurant. Dell will contribute cash equivalent to the the amount of P500,000. Jill will contribute her Business
contribution of Elle. Elle will contribute her Business with with the following Book Values:
the following Book Values:
Cash P150,000 Cash P150,000
Inventory P50,000 Inventory P50,000
Prepaid rent P60,000 Prepaid rent P60,000
Equipment P150,000 Equipment P150,000
Accounts Payable P90,000 Accounts Payable P90,000
Loans Payable P320,000
Loans Payable P320,000
The partners also agreed on the following:
The partners also agreed on the following:
a. The Loans Payable will not be assumed by the
a. The Loans Payable will not be assumed by the
Partnership.
Partnership.
b. Book values are equal to the Fair Values except
b. Book values are equal to the Fair Values except
Inventory which has a Fair Value of P60,000.
Inventory which has a FV of P60,000.
Required:
c. The partners will share equally in the net assets
1. Compute for the Total Contributed Capital of
of the partnership.
each partner.
Required:
2. Compute for the amount credited to each
1. Compute for the Total Contributed Capital of
partner.
each partner.
3. Journalize the formation of the partnership.
2. Compute for the Total Agreed Capital
 ARAÑEZ ACCOUNTING ADVANCE
3. Journalize the formation of the partnership. Required:
1. Compute for the Total Capital Contribution of
Problem 5 Ophelia.
Koko and Lolo formed a partnership on January 3, 2020 2. Compute for the Total Agreed Capital of Paolo.
by contributing the following net assets from their 3. How much is the bonus (to)/from Ophelia?
respective proprietorships: 4. How much is the bonus (to)/from Paolo?
Koko Lolo 5. Journalize the formation of the partnership
Cash P50,000 P30,000
Non-Cash Assets 650,000 750,000
Liabilities (400,000) (500,000)
Net Assets P 300,000 P280,000

The non-cash asset of Koko is understated by P10,000

while the liabilities of Lolo is overstated by P15,000. The
partners agreed to have a profit and loss ratio of 60:40,
respectively.

Required:
1. Compute for the Total Contributed Capital of
each partner.
2. Compute for the amount credited to each
partner.
3. Journalize the formation of the partnership.

Problem 6
Ophelia and Pablo are both Sole proprietors of their
own businesses. They decided to form a partnership.
The following are the Book values and the Fair Values of
their Businesses:
In peso ‘000 Ophelia Paolo
Book Fair Book Fair
Value Value Value Value
Cash 50 50 50 50
Inventory 100 90 170 170
Prepaid Rent 30 30
Machineries 50 60 150 200
Accounts 20 20 100 100
Payable
Loans 100 100
Payable
Additional Information:
a. The partners decided to have a profit or loss
ratio of 50:50
b. The partners will share in the net assets of the
partnership in the ratio of 40:60
c. All liabilities will be assumed by the partnership
except the Accounts payable of Ophelia.
d. The business will commence on July 1, 2020.
 ARAÑEZ ACCOUNTING ADVANCE
DIY DRILLS

DIY PROBLEM 1
Mama and Nana formed a partnership on January 3,
2020 by contributing the following net assets from their
respective proprietorships:
Mama Nana
Cash P60,000 P50,000
Non-Cash Assets 600,000 780,000
Liabilities (400,000) (530,000)
Net Assets P 260,000 P300,000

The non-cash asset of Mama is overstated by P5,000

while the liabilities of Nana is understated by P10,000.
The partners agreed to have an Interest/Capital ratio of
60:40, respectively.

Required:
1. Compute for the Total Contributed Capital of
each partner.
2. Compute for the amount credited to each
partner.
3. Journalize the formation of the partnership.

DIY Problem 2
Queen and Reign are both Sole proprietors of their own
businesses. They decide to form a partnership. The
following are the Book values and the Fair Values of
their Businesses:

In peso ‘000 Fair Values

Queen Reign
Current Assets 50 50
Property, Plant, 120 170
and Equipment
Current Liabilities 50 20
Non-Current 60 80
Liability
Net Assets 60 120
The partners stipulated a P/L ratio of 5:5

Required:
1. Compute for the Total Contributed Capital of
the partners
2. Compute for the Total Agreed Capital of the
partners.
3. Journalize the formation of the partnership