1. Kris and Ranz are combining their separate business to form a partnership.

Cash and non-

cash assets are to be contributed for a total capital of P500,000. The contributed liabilities
are to be assumed by the partnership. They further agreed that their capital balances after
formation must be equal.
The following are the assets and liabilities to be contributed by each entity:

Kris Ranz
Book Value Fair Value Book Value Fair Value
Accounts receivable 40,000 40,000 - -
Inventories 60,000 80,000 40,000 50,000
Equipment 120,000 90,000 80,000 100,000
Accounts payable 30,000 30,000 20,000 20,000

1. What is the amount of the additional cash to be contributed by Kris in

accordance with their agreement?
a. 300,000
b. 120,000
c. 420,000
d. 170,000

2. What is the amount of the capital credit to Ranz after formation?

a. 130,000
b. 100,000
c. 300,000
d. 150,000