Sir Win – Accounting Lectures

Jokes Tagalog
Stories Legit Professor
Life Lessons

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Lecture 03: Partnership Formation
(A sole proprietor and another individual form a partnership)
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The statement of financial position of Veronica Jara on March 1, 2021

before accepting Russeth Quezon as partner is shown as follows:

Veronica Jara Shoes

Statement of Financial Position
March 1, 2021

Cash 150,000
Accounts Receivable 280,000
Less: Allowance for bad debts (50,000) 230,000
Inventory 180,000
Land 300,000
Building 600,000
Less: Accum. Depr. – Building (60,000) 540,000
Total Assets 1,400,000

Accounts Payable 250,000

Notes Payable 140,000
Jara, Capital 1,010,000
Total Liabilities and Owner’s Equity 1,400,000
 Sir Win – Accounting Lectures
Jokes Tagalog
Stories Legit Professor
Life Lessons

Russeth Quezon offered to invest cash to get a capital credit equal to

one-half of Veronica Jara capital after giving effect to the adjustments
as follows:

a. The inventory is to be valued at 150,000

b. The accounts receivable is estimated to be 90% collectible
c. Interest on notes payable will be recognized. The note is dated
January 1, 2021 with 12% annual interest.
d. Land will be revalued at 500,000
e. Building is to be valued at 480,000
f. Office supplies on hand that have been charged to expense in the
past amounted to 15,000. These will be used by the partnership.

Required:
1. Journal entries to record the partnership formation
2. Statement of financial position after partnership formation.