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Lecture 03: Partnership Formation
(Two or more sole proprietors form a partnership)
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On November 30, 2021, Angelyn Lique and Charles Kevin Sultan,

friendly competitors in apparel business, decided to combine their
talents and capital to form a partnership. The partnership name will be
Charles Angel Clothing Circles. Their statement of financial position
before partnership formation are as follows:

Lique Clothing Lines

Statement of Financial Position
November 30, 2021

Cash 100,000
Accounts Receivable 200,000
Inventory 160,000
Furniture and Fixtures 120,000
Total Assets 580,000

Accounts Payable 100,000

Lique, Capital 480,000
Total Liabilities and Owner’s Equity 580,000
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Sultan Clothing Curves

Statement of Financial Position
November 30, 2021
Cash 100,000
Accounts Receivable 160,000
Inventory 200,000
Machineries 180,000
Total Assets 640,000

Accounts Payable 250,000

Sultan, Capital 390,000
Total Liabilities and Owner’s Equity 640,000

The conditions and adjustments agreed upon by the partners for

purposes of determining their interests in the partnership are:
a. Establishment of a 15% allowance for uncollectible accounts in
each book.
b. The inventory of Lique is to be increased by 20,000 while the
inventory of Sultan is to be decreased to 185,000.
c. The furniture and fixtures of Lique are to be depreciated by
15,000. The machineries of Sultan are to be depreciated by 10%.

Required:
1. Journal entries to record the partnership formation
2. Statement of financial position after partnership formation.