Professional Documents
Culture Documents
Problem 1
DBM, MGX and SPV decided to form a partnership. They are to engage in the business of
selling computers and related gadgets. DBM contributed cash of P700,000. MGX
contributed a house and lot, which he inherited from his grandfather three years ago. At the
time of inheritance, the property was valued at P1,575,000 for transfer tax purposes. A
week before the partnership was formed, several buyers indicated their intention to buy the
property for P2,187,500. SPV, being a computer science graduate, is to contribute his skills
and knowledge to the partnership. They agreed that SPV is to be given a 20% share in the
partnership profits.
Required:
Prepare journal entries to record the formation of the partnership.
Problem 2
JVC and KRX formed partnership on October 1, 2021 with the following investments:
JVC KRX
Cash P875,000 −
Land − P7,875,000
Equipment 4,375,000 −
JVC and KRX agreed to divide profits and losses in the ratio of 60:40, respectively and to
assume the mortgage payable amounting to P3,500,000 on the land invested by KRX.
Required:
a. Give the journal entries to record the investments of the partners.
b. Assume that KRX will continue to personally settle the mortgage payable related to
the land that he invested. Give the journal entries in the books of the partnership to
record the investments of the partners.
Problem 3
ITV Company
Statement of Financial Position
December 1, 2021
Assets
Cash P630,000
Accounts Receivable P1,680,000
Less: Allowance for Uncollectible Accounts 70,000 1,610,000
Merchandise Inventory 560,000
Property, Plant and Equipment P420,000
Less: Accumulated Depreciation 35,000 385,000
P3,185,000
On this date, ITV Co., the owner, admits YSL and the latter is to invest cash to give him a
capital credit equal to one-fourth (1/4) of ITV Co.’s capital after giving effect to the
adjustments of the following items:
The merchandise inventory is to be valued at P612,500.
The accounts receivable is estimated to be 95% collectible.
The recoverable amount of property, plant and equipment is estimated to be
P280,000.
A new set of books for the partnership is to be used in compliance with the BIR
requirements.
Required:
a. Prepare the necessary entries to adjust and close the books of ITV Company.
b. Prepare the entries to record the investments of ITV Co. and YSL in the new
partnership books.
c. Prepare a statement of financial position for the partnership of ITV Co. and YSL on
December 1, 2021.
Problem 4
On September 30, 2021, RBG and JLC, CPAs decided to form a partnership wherein they will
participate in the profits in the ratio of 40% and 60%, respectively. Their statements of
financial position on this date follows:
RBG Company
Statement of Financial Position
September 30, 2021
Assets
Cash P140,000
Accounts Receivable P1,400,000
Less: Allowance for Uncollectible Accounts 140,000 1,260,000
Equipment P437,500
Less: Accumulated Depreciation 87,500 350,000
Total Assets P1,750,000
JLC Company
Statement of Financial Position
September 30, 2021
Assets
Cash P612,500
Accounts Receivable P525,000
Less: Allowance for Uncollectible Accounts 52,500 472,500
Equipment P787,500
Less: Accumulated Depreciation 157,500 630,000
Total Assets P1,715,000
Required:
a. Prepare the required journal entries in the books of RBG and JLC to record the
adjustments of assets and liabilities and the closing of their respective books of
accounts.
b. Prepare the required journal entries in the new partnership books to record the
investment of the partners.
Problem 5
A B
Cash 262,500 656,250
Accounts Receivable 5,950,000 3,587,500
Merchandise Inventory 3,500,000 3,543,750
Equipment 2,625,000 5,075,000
12337500 12862500
Questions:
1. Assuming the use of transfer of capital method, how much must be A’s agreed
capital to bring the capital balances proportionate to their profit and loss ratio.
2. Assuming the use of transfer of capital method, by what amount will B debit his
capital account to bring the capital balances proportionate to their profit and loss
ratio?
3. Assuming A will invest / withdraw cash to bring the capital balances of the partners
proportionate to their profit and loss ratio, how much will A invest?
4. Assuming B will invest / withdraw cash to bring the capital balances proportionate
to their profit and loss ratio, how much will B invest?