Professional Documents
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A 1 Formation
A 1 Formation
PROBLEM 1
On June 30, 20x8 PAANO, the sole proprietor of PAANO Inc, expands
the company and establishes a partnership with NGA and BA. The
partners plan to share profits and losses as follows: PAANO, 50%;
NGA, 25% and BA 25%. They also agree that the beginning capital
balances of partnership will reflect this same relationship.
PAANO asked NGA to join the partnership because his many business
contacts are expected to be valuable during the expansion. NGA
is contributing P40,000 and a building that has an original cost
of P520,000, book value of P420,000, tax assessment of P310,000
and fair value of P370,000. The building is subject to a
P242,000 mortgage that the partnership will assume. BA is
contributing P66,000 and marketable securities costing P252,000
but are currently worth P345,000.
Balance Sheet
June 30, 20x8
Assets Liabilities and Capital
Cash P60,000 Accounts payable P318,000
Accounts receivable (net) 288,000 Notes payable 372,000
Inventory 432,000 PAANO, Capital 510,000
Equipment-net (dept’n, 420,000
P120k)
The partners agree that the inventory is worth P510,000, and the
equipment is worth half its original cost, and the allowance
established for doubtful accounts is correct.
PROBLEM 2
As of July 1, 20x8, UNA and HIRIT decided to form a partnership.
Their balance sheets on this date are:
UNA HIRIT
Cash P 24,000 P 60,000
Accounts Receivable 864,000 360,000
Merchandise Inventory - 324,000
Machinery and Equipment 240,000 432,000
Total P1,128,000 P1,176,000
PARTNERSHIP FORMATION 2
How much cash must UNA invest to bring the partners’ capital
balances proportionate to their profit and loss ratio?
PROBLEM 3
On August 1, JANE and JULIA pooled their assets to form a
partnership, with the firm to take over their business assets and
assume the liabilities. Partners’ capitals are to be based on net
assets transferred after the following adjustments. (Profit and
loss are allocated equally.)
JANE JULIA
Assets P150,000 P226,000
Liabilities 10,000 39,000
PROBLEM 4
AM and CONFUSED formed a partnership with each partner
contributing the following items:
AM CONFUSED
Cash P120,000 P 60,000
Building – cost to AM 450,000
- fair value 600,000
Inventory – cost to CONFUSED 300,000
PARTNERSHIP FORMATION 3
PROBLEM 5
On April 30, 20x8, WE, ARE, and BORED formed a partnership by
combining their separate business proprietorships. WE contributed
cash of P112,500. ARE contributed property with a P81,000
carrying amount, a P90,000 original cost, and P180,000 fair
value. The partnership accepted responsibility for the P78,750
mortgage attached to the property. BORED contributed equipment
with a P67,500 carrying amount, a P168,750 original cost, and
P123,750 fair value. The partnership agreement specifies that
profits and losses are to be shared equally but is silent
regarding capital contributions.
PROBLEM 6
On January 1, 20x8, Al and Bert both sole proprietors decided to
form a partnership to expand both of their businesses. According
to their agreement they will split profits and losses 75:25 and
their initial capital will also reflect that ratio.
Al Proprietor
Statement of Financial Position
December 31, 20x7
ASSETS LIABILITIES & EQUITY
Cash 50,000 Accounts Payable 65,000
Accounts Receivables 100,000 Accrued Expenses 55,000
Inventories 75,000 Notes Payable 80,000
Equipment 250,000 Al, Capital 90,000
Acc Dept’n-Equipment (185,000)
TOTAL 290,000 TOTAL 290,000
Bert Proprietor
Statement of Financial Position
December 31, 20x7
ASSETS LIABILITIES & EQUITY
Cash 30,000 Accounts Payable 75,000
PARTNERSHIP FORMATION 4
PROBLEM 7
On March 1, 20x8, X and Y formed a partnership. The partners
contributed the following:
X Y
Cash P500,000 P400,000
Accounts Receivable 300,000 200,000
Allowance for doubtful accounts 50,000 20,000
Inventory 150,000 100,000
Equipment 500,000 200,000
Accumulated depreciation 100,000 25,000
Accounts Payable 50,000 400,000
Note Payable 200,000
PROBLEM 8
On December 31, 20x7, Coke and Pepsi are combining their separate
businesses to form a partnership. Cash and noncash assets are to
be contributed. The noncash assets to be contributed and the
liabilities to be assumed are as follows:
Coke Pepsi
Book value Fair Value Book value Fair Value
Receivables P 500,000 P 525,000 P 400,000 P 390,000
Inventory 800,000 900,000 400,000 415,000
PPE 2,000000 1,825,000 1,725,000 1,660,000
Payables 300,000 300,000 225,000 225,000
Coke and Pepsi are to invest equal amounts of cash such that the
contribution of Coke would be 25% more than the investment of
Pepsi.