FORMATION OF A PARTNERSHIP

CAPITAL ACCOUNT
DR CR
1. PERMANENT WITHDRAWAL 1. ORIGINAL INVESTMENT OF THE PARTNER

2. SHARE IN THE PARTNERSHIP LOSS 2. ADDITIONAL INVESTMENT

3. DEBIT BALANCE OF THE DRAWINGS ACCT 3. SHARE IN THE PARTNERSHIP PROFITS

A DRAWINGS ACCOUNT

1. TEMPORARY WITHDARWAL IN 1. SHARE IN THE PARTNERSHIP PROFITS

ANTICIPATION OF THE PROFIT

2. SHARE IN THE PARTNERSHIP LOSS

INCOME SUMMARY 100,000.00

SANTOS, CAPITAL 100,000.00

1ST INCOME SUMMARY 100,000.00

A, CAPITAL 50,000.00
B, CAPITAL 50,000.00

2ND INCOME SUMMARY 100,000.00

A, DRAWINGS 50,000.00
B, DRAWINGS 50,000.00

A, DRAWINGS 10000
B, DRAWINGS 10000
INCOME SUMMARY 20000
 A, CAPITAL

THE PARTNER

A, DRAWINGS

AGREED VALUE OR FAIR MARKET VALUE

CASH 100,000.00
A, CAPITAL 50,000.00
B, CAPITAL 50,000.00

FURNITURE AND FIXTURES 9,000.00

A, CAPITAL 9,000.00

CASH 100,000.00
FURNITURE AND FIXTURES 9,000.00
A, CAPITAL 59,000.00
B, CAPITAL 50,000.00

PARTNER
LAND COST 5 YRS 2M
FMV 4M
BALANCE-LOAN 700,000
LAND 4,000,000.00
B, CAPITAL 3,300,000.00
LOAN PAYABLE 700,000.00

LAND 4000000
B, CAPITAL 4,000,000.00
 B, CAPITAL
B IS ADMITTED AS AN INDUSTRIAL PARTNER
TO SHARE 1/2 IN THE PARTNERSHIP PROFIT.

B, DRAWINGS

LAND CAPITAL
A. 2M A. 2M
B. 4M B. 4M
C. 2M-700K C. 2M-700K
D. 4M-700K D. 4M-700K
FORMATION

A. TWO OR MORE PERSONS FORM A PARTNERSHIP - ALL PARTNERS ARE NEW IN THE BUSINESS
.
CASH 100,000.00
A, CAPITAL 50,000.00
B, CAPITAL 50,000.00

EQUIPMENT 25,000.00
C, CAPITAL 25,000.00

B. TWO OR MORE PERSONS FORM A PARTNERSHIP - A SOLE PROPRIETOR AND AN INDIVIDUAL WHO IS NEW IN THE

* Use the books of the proprietor

* Use a new set of books for the partnership

steps: Using the books of the sole proprietor

A. ADJUST THE BOOKS OF THE SOLE PROPRIETOR TO BRING ACCOUNT BALANCES TO AGREED VALUES
B. RECORD THE INVESTMENT OF THE PARTNER

ILLUSTRATIVE PROBLEM

A. USING THE BOOKS OF THE SOLE PROPRIETOR

1. AMORES, CAPITAL 25,000.00

ALLOWANCE FOR BAD DEBTS 25,000.00

ASSETS = LIABILITIES + CAPITAL

DECREASE DECREASE

2. MERCHANDISE INVENTORY 160,000.00

AMORES, CAPITAL 160,000.00

3. PREPAID EXPENSE 72,000.00

AMORES, CAPITAL 30,000.00
ACCRUED RENT EXPENSE 102,000.00

4. CASH 1,717,000.00
ANDRADA, CAPITAL 1,717,000.00
 UNADJUSTED CAPITAL OF AMORES 1,612,000.00
ADD/DEDUCT ADJUSTMENTS
BAD DEBTS - 25,000.00
MERCHANDISE 160,000.00
PREPAID AND ACCRUEd EXP - 30,000.00
ADJUSTED CAPITAL OF AMORES 1,717,000.00

B. USING A NEW SET OF BOOKS

1. CASH 208,000.00
ACCOUNTS RECEIVABLE 460,000.00
MERCHANDISE INVENTORY 1,600,000.00
PREPAID EXPENSE 72,000.00
ACCOUNTS PAYABLE 496,000.00
ACCRUED RENT EXPENSE 102,000.00
ALLOW. FOR BAD DEBTS 25,000.00
AMORES, CAPITAL 1,717,000.00

2. CASH 1,717,000.00
ANDRADA, CAPITAL 1,717,000.00

WHAT WILL HAPPEN TO THE BOOK OF AMORES?

* IT SHOULD BE ADJUSTED
* IT SHOULD BE CLOSED

TO ADJUST THE BOOKS OF AMORES:

1. AMORES, CAPITAL 25,000.00

ALLOWANCE FOR BAD DEBTS 25,000.00

ASSETS = LIABILITIES + CAPITAL

DECREASE DECREASE

2. MERCHANDISE INVENTORY 160,000.00

AMORES, CAPITAL 160,000.00

3. PREPAID EXPENSE 72,000.00

AMORES, CAPITAL 30,000.00
ACCRUED RENT EXPENSE 102,000.00
TO CLOSE THE BOOKS OF AMORES:

ACCOUNTS PAYABLE 496,000.00

ACCRUED RENT EXPENSE 102,000.00
ALLOW. FOR BAD DEBTS 25,000.00
AMORES, CAPITAL 1,717,000.00
CASH 208,000.00
ACCOUNTS RECEIVABLE 460,000.00
MERCHANDISE INVENTORY 1,600,000.00
PREPAID EXPENSE 72,000.00
IVIDUAL WHO IS NEW IN THE BUSINESS

REED VALUES

AMORES & ANDRADA PARTNERSHIP

STATEMENT OF FINANCIAL POSITION
JANUARY 1, 2020

ASSETS

CASH
ACCOUNTS RECEIVABLE 460,000.00
LESS: ALLOW FOR BAD DEBTS 25,000.00
MERCHANDISE INVENTORY
PREPAID EXPENSE
TOTAL ASSETS

LIABILITIES AND PARTNERS' EQUITY

ACCOUNTS PAYABLE
ACCRUED EXPENSE
AMORES, CAPITAL
ANDRADA CAPITAL
TOTAL LIABILITIES & PARTNERS' EQUITY
NERSHIP
OSITION

1,925,000.00

435,000.00
1,600,000.00
72,000.00
4,032,000.00

EQUITY

496,000.00
 102,000.00
1,717,000.00
1,717,000.00
4,032,000.00
 ABADA ALBANO
BOOK VALUE AGREED VALUE BOOK VALUE
CASH 50,000.00 70,000.00
ACCOUNTS RECEIVABLE 460,000.00 490,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 30,000.00 40,000.00 40,000.00
MERCHANDISE INVENTORY 900,000.00 950,000.00 720,000.00
EQUIPMENT 180,000.00 120,000.00 90,000.00
ACC. DEPRECIATION EQUIPMENT 36,000.00 9,000.00
FURNITURE & FIXTURES 120,000.00 90,000.00
ACC. DEPRECIATION- F & F 24,000.00
ACCOUNTS PAYABLE 540,000.00 360,000.00

A. NEW SET OF BOOKS

B. BOOKS OF ABADA
C. BOOKS OF ALVANO

NEW SET OF BOOKS

A. CASH 50,000.00
ACCOUNTS RECEIVABLE 460,000.00
MERCHANDISE INVENTORY 950,000.00
EQUIPMENT 120,000.00
FURNITURE & FIXTURES 90,000.00
ACCOUNTS PAYABLE 540,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 40,000.00
ABADA, CAPITAL 1,090,000.00

B. CASH 70,000.00
ACCOUNTS RECEIVABLE 490,000.00
MERCHANDISE INVENTORY 700,000.00
EQUIPMENT 70,000.00
ACCOUNTS PAYABLE 360,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 50,000.00
ALBANO, CAPITAL 920,000.00

B. BOOKS OF ABADA-PARTNERSHIP BOOKS

1. ABADA, CAPITAL 10,000.00

ALLOW. FOR DOUBTFUL ACCOUNTS 10,000.00

2. MERCHANDISE INVENTORY 50,000.00

ABADA, CAPITAL 50,000.00

3. ACC. DEPRECIATION 36,000.00

 ABADA, CAPITAL 24,000.00
EQUIPMENT 60,000.00

4. ACC. DEPRECIATION 24,000.00

ABADA, CAPITAL 6,000.00
FURNITURE & FIXTURES 30,000.00

5. CASH 70,000.00
ACCOUNTS RECEIVABLE 490,000.00
MERCHANDISE INVENTORY 700,000.00
EQUIPMENT 70,000.00
ACCOUNTS PAYABLE 360,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 50,000.00
ALBANO, CAPITAL 920,000.00

B. BOOKS OF ALBANO - PARTNERSHIP BOOK

1. ALBANO, CAPITAL 10,000.00

ALLOW. FOR DOUBTFUL ACCOUNTS 10,000.00

2. ALBANO, CAPITAL 20,000.00

MERCHANDISE INVENTORY 20,000.00

3.. ACC. DEPRECIATION 9,000.00

ALBANO, CAPITAL 11,000.00
EQUIPMENT 20,000.00

4. CASH 50,000.00
ACCOUNTS RECEIVABLE 460,000.00
MERCHANDISE INVENTORY 950,000.00
EQUIPMENT 120,000.00
FURNITURE & FIXTURES 90,000.00
ACCOUNTS PAYABLE 540,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 40,000.00
ABADA, CAPITAL 1,090,000.00
TO ADJUST AND CLOSE THE BOOKS OF ABADA:
ADJSUSTING ENTRIES
1. ABADA, CAPITAL 10,000.00
ALLOW. FOR DOUBTFUL ACCOUNTS 10,000.00

2. MERCHANDISE INVENTORY 50,000.00

ABADA, CAPITAL 50,000.00

3. ACC. DEPRECIATION 36,000.00

ABADA, CAPITAL 24,000.00
EQUIPMENT 60,000.00

4. ACC. DEPRECIATION 24,000.00

ABADA, CAPITAL 6,000.00
FURNITURE & FIXTURES 30,000.00

CLOSING THE BOOKS

ACCOUNTS PAYABLE 540,000.00

ALLOW. FOR DOUBTFUL ACCOUNTS 40,000.00
ABADA, CAPITAL 1,090,000.00
CASH 50,000.00
ACCOUNTS RECEIVABLE 460,000.00
MERCHANDISE INVENTORY 950,000.00
EQUIPMENT 120,000.00
FURNITURE & FIXTURES 90,000.00

TO ADJUST AND CLOSE THE BOOKS OF ALBANO:

1. ALBANO, CAPITAL 10,000.00

ALLOW. FOR DOUBTFUL ACCOUNTS 10,000.00

2. ALBANO, CAPITAL 20,000.00

MERCHANDISE INVENTORY 20,000.00

3.. ACC. DEPRECIAITON 9,000.00

ALBANO, CAPITAL 11,000.00
EQUIPMENT 20,000.00

4. ACCOUNTS PAYABLE 360,000.00

ALLOW. FOR DOUBTFUL ACCOUNTS 50,000.00
ALBANO, CAPITAL 920,000.00
CASH 70,000.00
ACCOUNTS RECEIVABLE 490,000.00
MERCHANDISE INVENTORY 700,000.00
EQUIPMENT 70,000.00
ALBANO
AGREED VALUE

50,000.00
700,000.00
70,000.00

ABADA & ALBANO PARTNERSHIP

STATEMENT OF FINANCIAL POSITION
JANUARY 1, 2020

ASSETS

CASH
ACCOUNTS RECEIVBLE 950,000.00
LESS: ALLOWANCE FOR DOUBTFUL ACCOUNTS 90,000.00
MERCHANDISE INVENTORY
EQUIPMENT
FURNITURE & FIXTURES
TOTAL ASSETS

LIABILITIES & CAPITAL

ACCOUNTS PAYABLE
ALBANO, CAPITAL
ABADA, CAPITAL
TOTAL LIABILITIES & CAPITAL

COST 180,000.00
 ACC. DEPRN 36,000.00
BOOK VALUE 144,000.00 120,000.00

EQUIPMENT
180,000.00 60,000.00

BAL. 120,000.00

ACC. DEPRECIATION-EQUIPMENT
36,000.00 36,000.00

COST 120,000.00
ACC. DEPRN 24,000.00
BOOK VALUE 96,000.00 90,000.00

COST 90,000.00
ACC. DEPRN 9,000.00
BV 81,000.00 70,000.00 - 11,000.00
 120,000.00

860,000.00
1,650,000.00
190,000.00
90,000.00
2,910,000.00

900,000.00
920,000.00
1,090,000.00
2,910,000.00
- 24,000.00

6,000.00