FRYZIEL RHEENAMAE C.

PACPAKIN
PRE 6 - (7:15 - 8:15 MWF)

PROBLEM 1
The following items are being invested by A and B to form AB Partnership:
Agreed Values
Investment by A Investment by B
Cash ……………………………………………………………. P 120,000 P 120,000
Inventory ……………………………………………………… 120,000 -
Land ……………………………………………………………. - 240,000
Building ………………………………………………………. - P 480,000
Equipment ………………………………………………….. 240,000
Totals ………………………………………………………….. P 480,000 P 840,000
Mortgage on building assumed by the partnership. - 240,000
P 480,000 P 600,000

REQUIRED:
1. Prepare entries to record the formation of partnership assuming that A and B agree that each partner is to receive a capit

Cash 120,000
Inventory 120,000
Equipment 240,000
A's capital 480,000
Initial Investment of A

Cash 120,000
Land 240,000
Building 480,000
Mortgage Payable 240,000
B's capital 600,000
Initial Investment of B

2. Prepare entries to record the formation of partnership assuming that A and B agree that each partner is to receive and eq

B's capital 60,000

A's capital 60,000

Computation:
Total agreed capital (P 480,000 + P 600,000) P 1,080,000
(x) capital interest (equally) x 1/2
Partner's individual capital interest P 540,000
Less: A's capital interest 480,000
Bonus to A P 60,000
 Asset (Goodwill) 120,000
A's capital 120,000

Computation:
Total agreed capital (P 600,000 / 1/2) P 1,200,000
Less: Total contributed capital (P 480,000 + P600,000) 1,080,000
Goodwill to A P120,000

PROBLEM 2
Tom and Julie formed a management consulting partnership on January 1, 20x4. The fair value of the net assets invested by ea

Tom Julie
Cash P 13,000 P 12,000
Accounts Receivable 8,000 6,000
Office Supplies 2,000 800
Office Equipment 30,000 -
Land - 30,000
Accounts payable 2,000 5,000
Mortgage payable - 18,800

During the year, Tom withdrew P15,000 and Julie withdrew P 12,000 in anticipation of operating profits
Net profit for 20x4 was P 50,000, which is allocated based on the original net capital investment.

REQUIRED:
1. Prepare journal entries to:
A. record the initial investment in the partnership

Cash P13,000
Accounts Receivable 8,000
Office Supplies 2,000
Office Equipment 30,000
Accounts payable 2,000
Tom's capital 51,000
Initial Investment of Tom

Cash P 12,000
Accounts Receivable 6,000
Office Supplies 800
Land 30,000
Accounts payable 5,000
Mortgage payable 18,800
Julie's capital 25,000
Initial Investment of Julie
 B. Record the withdrawals

Tom, drawing 15,000

Cash 15,000

Julie, drawing 12,000

Cash 12,000

C. Close the Income Summary and Drawing accounts

Income Summary 50,000

Tom's Capital 33,553
Julie's Capital 16,447

COMPUTATION:
Tom - 50,000 x 51,000 / 76,000 = 33,553
Julie - 50,000 x 25,000 / 76,000 =16,447

Tom's Capital 15,000

Tom's Drawing 15,000

Julie's Capital 12,000

Julie's Drawing 12,000

2. Prepare a statement of changes in partner's capital for the year ended December 31, 20x4

Tom and Julie Partnership

Statement of Changes in Partner's Capital
For the year ended December 31, 20x4

TOM JULIE TOTAL

Capital Balances, Jan 1 - - -
Add: Additional Investments 51,000 25,000 P 76,000
Net Income Allocation 33,553 16,447 P 50,000
Totals P 84,553 P 41,447 P126,000
Less: Withdrawals 15,000 12,000 P 27,000
Capital Balances, Dec 31 P 69,553 P 29,447 P 99,000

PROBLEM 3
The balance sheet of H on November 30, 20x4 before accepting I as his partner to form HI Partnership is presented below:
 H
Balance Sheet
November 30, 20x4

Assets
Cash P 120,000
Accounts receivable P 48,000
Less: Allowance for doubtful accounts 3,000 45,000
Notes receivable 60,000
Merchandise Inventory 27,000
Equipment 72,000
Loss: Accumulated depreciation 6,000 66,000
Total Assets P 318,000

Liabilities and Capital

Accounts payable P 12,000
Notes payable 60,000
H, capital 246,000
Total Liabilities and Capital P 318,000

It is agreed that for purpose of establishing H's interest the following adjustments shall be made:
a. The accounts receivable is estimated to be 90% realizable
b. Interest at 8% on notes receivable dated March 1, 20x4 is to be accrued.
c. The merchandise inventory is to be valued at P21,000.
d. The equipment is under-depreciated by P4,800.
e. Prepaid expenses of P2,400 and accrued expenses of P7,200 are to be recognized.
I is to invest cash to obtain a one-third interest in the partnership.

REQUIRED:
1. Prepare the following entries in the books of H, as to:
a. Adjustments

a. H, capital 1,800
Allowance for doubtful accounts 1,800
Additional provision

Computation:
Required allowance: P 48,000 x 10% P 4,800
Less: Previous Balance 3,000
Additional provision P 1,800

b. Interest receivable or Accrued Interest Income 3,600

H, capital 3,600
Interest Income for 9 months
 Computation:
P 60,000 x 8% x 9/12 = P 3,600

c. H, capital 6,000
Merchandise Inventory 6,000
Decline in the value of merchandise

Computation:
P 27,000 - P 21,000 = P 6,000

d. H, capital 4,800
Accumulated depreciation 4,800
Under depreciation

e. Prepaid expenses 2,400

H, capital 2,400
Expenses paid in advance

H, capital 7,200
Accrued Expenses 7,200
Unrecorded expenses

b. Closing

" Nothing to close since the books of H will be retained"

c. Investments

Cash 116,100
I, capital 116,100
Initial Investment

Computation:
Unadjusted capital of H P 246,000
Adjustments:
a. Doubtful accounts -1,800
b. Interest income 3,600
c. Decline in value of merchandise -6,000
d. Under-depreciation -4,800
e. Prepaid expenses 2,400
Accrued expenses -7,200 -13,800
Adjusted capital balance of H P 232,200
Divided by: Capital Interest of H 2/3
Total agreed capital P 348,300
Multiplied by: Capital Interest of I 1/3
 Investment of I P 116,100

2. Prepare the balance sheet after the formation of the partnership.

HI PARTNERSHIP
BALANCE SHEET
NOVEMBER 30, 20X4

ASSETS
Cash P 236,100
Accounts receivable P 48,000
Less: Allowance for doubtful accounts 4,800 43,200
Notes receivable 60,000
Interest receivable 3,600
Merchandise Inventory 21,000
Prepaid expenses 2,400
Equipment (net) 72,000
Less: Accumulated Depreciation 10,800 61,200

Total Assets P 427,500

LIABILITIES AND CAPITAL

Liabilities
Accrued expenses P 7,200
Accounts payable 12,000
Notes Payable 60,000
Total Liabilities P 79,200

Capital
H, capital P 232,200
I, capital 116,100
Total Capital P 348, 300

Total Liabilities and Capital P 427,500

PROBLEM 4
On October 1, 20x4, J and K decided to pool their assets and form a partnership. They allocate profit and
loss in the ratio of 44:56 for J and K, respectively. The firm is to take over business assets and assume
business liabilities, and capitals are to be based on net assets transferred after the following
adjustments:

a. J’s inventory amounting to P12,000 is worthless, while K’s agreed value of inventory amounted to
P150,000.
b. Uncollectible accounts of P7,200 for J is to be provided; a 5% allowance is to be recognized in the
books of K.
c. Accrued rent income of P12,000 on J, and accrued salaries of P9,600 on K should be recognized on
their respective books.
d. Interest at 16% on Notes Receivable dated August 17, 20x4 should be accrued.
e. The office supplies unused amounted to P24,000.
f. The equipment’s agreed value amounted to P60,000.
g. The furniture and fixtures has a fair market value of P108,000.
h. Interest at 12% on Notes Payable dated July 1,20x4 should be accrued.
i. K has an unrecorded patent amounting to P48,000 and is to invest the additional cash necessary to
have a 60% interest in the new firm.
In cases, where in days are considered, use 360 days as the basis
Balance sheets for J and K on October 1, 20x4 before adjustments are given below:

ACCOUNTS J K
Cash P 90,000 P 54,000
Accounts receivable 216,000 180,000
Allowance for Doubtful accounts -4,800 -6,000
Notes receivable 60,000
Merchandise Inventory 192,000 144,000
Office supplies 32,400
Equipment 120,000
Accumulated depreciation - equipment -54,000
Furniture and Fixtures 144,000
Accumulated depreciation - furniture and fixtures -24,000
Total Assets P 591,600 P 552,000
Accounts payable 159,600 120,000
Notes payable 60,000
Capitals 372,000 432,000
Total Liabilities and Capital P 591,600 P 552,000

REQUIRED:
1. Prepare the following entries in the books J ang K:
a. adjusting

BOOKS OF J

a. J's capital 12,000 a. Merchandise Inventory

Merchandise Inventory 12,000
Worthless Inventory Revaluation

b. J, capital 7,200 b. K, capital

Allowance for Doubtful Accounts 7,200
 Worthless Accounts Additional provision

c. Rent receivable 12,000 c. K, capital

J, capital 12,000
Income Earned Unpaid salaries

d. Interest receivable

Interest Income from Au

e. J, capital 8,400
Office Supplies 8,400
Unused Office supplies

Computation:
32,400 - 24,000 = P 8,400

f. J, capital 6,000
Accumulated depreciation - equipment 6,000
Under-depreciated

Computation:
60,000 - 54,000 = P 6,000

g. K, capital

Under depreciated

h. J, capital 1,800
Interest payable 1,800
 Interest expense from July - Oct

Computation:
60,000 x 12% x 3/12 = P 1,800

i. Patent

Unrecorded patent

Unadjusted capital of J P 372,000 Unadjusted capital of K

Adjustments: Adjustments:
a. Worthless Inventory -12,000
b. Worthless accounts -7,200
c. Rent Income 12,000
e. Office supplies expense -8,400
f. Additional depreciation -6,000
h. Interest expense -1,800 -23,400
Adjusted capital of J P 348, 600 Adjusted capital of K

b. Closing

BOOKS OF J

Allowance for doubtful accounts 12,000 Allowance for doubtful accoun

Accumulated Depreciation - Equipment 60,000 Accumulated depreciation -
Accounts payable 159,600 furnitures and fixtures
Notes payable 60,000 Accounts payable
Interest payable 1,800 Salaries payable
J, capital 348,600 K, capital
Cash 90,000
Accounts receivable 216,000
Merchandise Inventory 180,000
Office supplies 24,000
Equipment 120,000
Rent receivable 12,000
To close the books of J
To close the books of K

2. Prepare the following entries in the new set of book, as to the investments (or withdrawal, if any)
made by respective partners

BOOKS OF J

Cash 90,000 Cash

Accounts receivable 216,000 Accounts receivable
Merchandise Inventory 180,000 Notes receivable
Office supplies 24,000 Interest receivable
Equipment (net) 60,000 Merchandise Inventory
Rent receivable 12,000 Furniture and Fixtures (net)
Allowance for doubtful accounts 12,000 Patent
Accounts payable 39,600
Notes payable 60,000
Interest payable 1,800
J, capital 468,600

3. Determine the following:

a. Net adjustments in the books of J and K (identify net debit or net credit adjustments).
b. The adjusted capital of J and K in their respective books.
J K
Unadjusted capital P372,000 P 432,000
Adjusted capital 348,600 462,600
Net adjustments (debit) / credit (P 23,400) P 30,600

c. The additional investment made by K.

4. Prepare the balance sheet after the formation of the partnership.

J AND K PARTNERSHIP
BALANCE SHEET
OCTOBER 1, 20X4

ASSETS
Cash P 144,000
Accounts receivable P 396,000
Less: Accumulated depreciation 21,000 375,000
Notes receivable 60,000
Interest receivable 1,200
Rent receivable 12,000
Merchandise Inventory 330,000
Office Supplies 24,000
Equipment (net) 60,000
Furnitures and Fixtures (net) 108,000
Patent 48,000

Total Assets P 1,162,200

LIABILITIES AND CAPITAL

Liabilities
Salaries payable P 9,600
Accounts payable 159,600
Notes payable 60,000
Interest payable 1,800
Total Liabilities P 231,000

Capital
J, capital P 468,600
K, capital 462,600
Total Capital P 931,200

Total Liabilities and Capital P 1,162,200

ach partner is to receive a capital equal to the agreed values of the net assets each partner invested.

ach partner is to receive and equal capital interest.

of the net assets invested by each partner follows:
nership is presented below:
 BOOKS OF K

a. Merchandise Inventory 6,000

K, capital 6,000
Revaluation

Computation:
150,000 - 144,000 = P 6,000

b. K, capital 3,000
Allowance for Doubtful accounts 3,000
 Additional provision

Computation:
Required allowance:
P 180,000 x 5% 9,000
Less: Previous Balance 6,000
Additional Provision P 3,000

c. K, capital 9,600
Salaries Payable 9,600
Unpaid salaries

d. Interest receivable 1,200

K, capital 1,200
Interest Income from August 17 - October 1

Computation:
60,000 x 16% x 45/360 = P 1,200

g. K, capital 12,000
Accumulated Depreciation - 12,000
Furnitures and Fixtures
Under depreciated

Computation:
144,000 - 24,000 = 120,000
Less: 108,000
Total P 12,000
 48,000
K, capital 48,000
Unrecorded patent

Unadjusted capital of K P 432,000

Adjustments:
a. Merchandise revaluation 6,000
b. Worthless Accounts -3,000
c. Salaries -9,600
d. Interest Income 1,200
g. Additional depreciation -12,000
h. Patent 48,000 30,600
Adjusted capital of K P 462,600

BOOKS OF K

Allowance for doubtful accounts 9,000

Accumulated depreciation - 36,000
furnitures and fixtures
Accounts payable 120,000
Salaries payable 9,600
462,600
Cash 54,000
Accounts receivable 180,000
Notes receivable 60,000
Interest receivable 1,200
Merchandise Inventory 150,000
Furnitures and Fixtures 144,000
Patent 48,000
To close the books of K

BOOKS OF K

54,000
Accounts receivable 180,000
Notes receivable 60,000
Interest receivable 1,200
Merchandise Inventory 150,000
Furniture and Fixtures (net) 108,000
48,000
Allowance for doubtful accounts 9,000
Accounts payable 120,000
Salaries payable 9,600
K, capital 462,600