ILLUSTRATIVE PROBLEMS

Problem 1
Partner’s Original Investment
Froilan Labausa contributed land, inventory, and P280,000 cash to a partnership. The land has a
book value of P650,000 and a market value of P1,350,000. The inventory has a book value of
P600,000 and a market value of P510,000. The partnership also assumed a P350,000 note
payable owed 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.

Problem 2
Formation of a Partnership
Sabio, as her original investment in the firm of Sabio and Mariano, contributed equipment that
had been recorded in the books of her own business as costing P900,000, with accumulated
depreciation of P620,000. The partners agreed on a valuation of P400,000. They also agreed to
accept Sabio’s accounts receivable of P360,000, realizable to the extent of 85%.
Required:
Prepare the journal entry to record Sabio’s investment in the partnership on June 13.

Problem 3
Formation of a Partnership
Gogola and Paglinawan have just formed a partnership. Gogola contributed cash of P1,260,000
and computer equipment that cost P540,000. The fair value of the computer is P360,000.
Gogola has notes payable on the computer of P120,000 to be assumed by the partnership.
Gogola is to have 60% capital interest in the partnership. Paglinawan contributed only
P900,000. The partners agreed to share profit and loss equally.
Gogola should make an additional investment or (withdrawal) of __________.
Problem 4
Two Sole Proprietors Form a Partnership
Calaguas and Dela Cruz formed a partnership and invested the following assets and liabilities:

Fair Market Value Carrying Value

Calaguas:
Cash P300,000 P300,000
Land 450,000 280,000
Dela Cruz:
Cash 100,000 100,000
Building 600,000 520,000
Mortgage Payable (400,000) (400,000)

The partners will share profits and losses equally.

Required:

Prepare the opening journal entry in the books of the partnership.

Problem 5
A Sole Proprietor and an Individual with No Business Form a Partnership
Espanol operated a specialty shop that sold fishing equipment and accessories. Her post-closing
trial balance on Dec. 31, 2018 is as follows:
Fish
Post-Closing Trial Balance
Dec. 31,2018

Debit Credit
Cash P 36,000
Accounts Receivable 150,000
Allowance for Uncollectible Accounts P 16,000
Inventory 440,000
Equipment 135,000
Accumulated Depreciation 75,000
Accounts Payable 30,000
Espanol, Capital 640,000
761,000 P761,000

Espanol plans to enter into a partnership with trusted associate, Quino, effective Jan. 1, 2019.
Profits or losses will be shared equally. Espanol is to transfer all assets and liabilities of her shop
to the partnership after revaluation.

Quino will invest cash equal to Espanol’s investment after revaluation. The agreed values are as
follows: accounts receivable (net), P140,000; inventory, P460,000; and equipment (net),
P124,000. The partnership will operate under the business name of Fish R’ Us.
Required:
1. Prepare the opening journal entries in the books of the partnership.
2. Prepare the partnership’s statement of financial position as at the date of formation of the
partnership.