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partnership wherein they will divide profits in the ratio of 60:40, respectively. The statement of
the financial position of Santos is as follows:
Timmy Marketing
Statement of Financial Position
January 31, 2011
Assets
Cash P 4,000
Accounts receivable P 160,000
Less: Allowance for Uncollectible Accts. (16,000) 144,000
Inventory 200,000
Equipment P 50,000
Less: Accumulated Depreciation (10,000) 40,000
Total Assets P 388,000
Liabilities and Capital
Accounts payable P 36,000
Timmy, Capital 352,000
Total liabilities and Capital 388,000
Conditions agreed upon before the formation of the partnership:
a. The accounts receivable of Santos is estimated to be 70% realizable.
b. The accumulated depreciation of the equipment will be increased by P 10,000.
c. The accounts payable will be assumed by the partnership.
d. The capital of the partnership is based on the adjusted capital of Santos, Salvador is to
contribute cash in order to make the partner’s capital balances proportionate to the
profit and loss ratio.
Required:
1. Prepare the necessary journal entries in the books of Timmy.
2. Prepare the opening journal entries in the books of partnership.
Books of Timmy
Closing
Equipment 50,000
To close the books of Timmy
Vince Salvador cash contribution based on the adjusted capital of Timmy Santos