Buddy admits Sol to be a partner in his business.

Accounts in the books a of Buddy on

October 3 1, 200 Y, prior to the admission of Sol shows the following balances:

Cash P 10,500.00
Accounts Receivable 41,600.00
Allowance for Bad Debts 3,000
Merchandise Inventory 89,400.00
Fixed Assets 70,000
Accumulated depreciation 16,700
Accounts Payable 40,350.00
Buddy, Capital 151,450.00

It is agreed that some accounts in the books of Buddy have to be revalued and the
following adjustment be made:

1) Merchandise Inventory is to be valued at PI 09,950.00

2) An allowance for bad debts of 5% is to provided for.
3) Accrued salaries for P 1,620.00 is to be recorded
4) Carrying value of the fixed asset is 55,000
5) Unused supplies was inventoried at 2,500

Sol is to invest Cash to give him 1/3 interest in the Buddy and Sol partnership.

Required:
1) Give the journal entries to adjust the books of Buddy.
2) Give the journal entries on new set of books of the partnership to record the investment of Buddy and Sol.
3) Prepare the balance sheet of Buddy and Sol partnership.
 Solutions:
1. Journal Entries to Adjust the Books of Buddy
Accounts Titles Debit
Merchandise Inventory P 20,550
Buddy, Capital

Allowance for Bad Debts 920

Buddy, Capital

Buddy, Capital 1,620

Salaries Payable

Accumulated Depreciation 1,700

Buddy, Capital

Supplies 2,500
Buddy, Capital

2. Journal Entries on the new set of books of the partnership.

Account titles Debit
Cash P 10,500
Accounts Receivable 41,600
Merchandise Inventory 109,950
Supplies 2,500
Fixed Assets 70,000
ment of Buddy and Sol. Allowance for Bad Debts
Accumulated Depreciation
Accounts Payable
Salaries Payable
Buddy, Capital

Cash P 87,750
Sol, Capital
 3. Balance Sheet of Buddy and Sol partnership
Credit Buddy and Sol
Statement of Financial Position
P 20,550 Assets
Cash
Accounts Receivable P
920 Less: Allowance for Bad Debts
Merchandise Inventory
Supplies
1,620 Fixed Assets
Less: Accumulated Depreciation
TOTAL ASSETS
1,700 Liabilities and Owner's Equity
Accounts Payable
Salaries Payable
2,500 Buddy, Capital P
Sol, Capital
TOTAL LIABILITIES AND OWNER'S EQUITY
Credit

P 2,080
15,000
40,350
1,620
175,500

P 87,750
nd Sol
ancial Position

P 98,250
41,600
-2,080 39,520
109,950
2,500
70,000
-15,000 55,000
P 305,220

P 40,350
1,620
175,500
87,750 263,250
305,220