ACCTG 12 PARTNERSHIP FORMATION

ACTIVITY I

General Instruction. Read each requirement carefully. Write your answers on sheets of paper
and compile it (scanned) in one pdf file. Send your outputs to
https://www.facebook.com/michaelangelo.mateo.50 (messenger) before FRIDAY, February 25,
2022.

Problem I

Debbie Adriano and Helenita Ruiz decided to form a partnership by combining the assets of
their separate businesses. Adriano contributed the following assets to the partnership: cash,
P150,000; accounts receivable with a face amount of P1,590,000 and an allowance for
uncollectible accounts of P97,000; merchandise inventory with a cost of P1,000,000; and
equipment with a cost of P1,550,000 and accumulated depreciation of P1,000,000.

The partners agreed on the following:

a. that P60,000 of the accounts receivable are completely worthless and are not to be accepted
by the partnership,

b. that P114,000 is a reasonable allowance for the uncollectibility of the remaining accounts,

c. that the merchandise inventory is to be recorded at the net realizable value of P914,500, and

d. that the equipment is to be valued at P625,000.

Requirement:

Prepare the journal entry to record Adriano's investment in the partnership.

Problem II

On Oct. 31, 2020, Apalisoc and Tuddao agreed to combine their proprietorships as a
partnership. Their statements of financial position are as follows:

Apalisoc's Business Tuddao's Business

Book Current Book Current

Cash P 37,000 P 37,000 P 80,000 P 80,000

Accounts Receivable (net) 220,000 202,000 80,000 63,000

Inventory 510,000 460,000 340,000 351,000

Property and Equipment (net) 1,218,000 1,235,000 535,000 574,000

Total Assets P1,985,000 P1,934,000 P1,035,000 P1,068,000

LIABILITIES AND CAPITAL

Accounts Payable P 236,000 P 236,000 P 91,000 P 91,000

Accrued Expenses 22,000 22,000 14,000 14,000

Notes Payable 750,000 750,000 - -

Apalisoc, Capital 977,000 - - -

Tuddao, Capital - - 930,000 -

Total Liabilities & Capital P1,985,000 P1,934,000 P1,035,000 P1,068,000

Requirement:

1. Record the partnership formation.

2. Prepare the partnership's statement of financial position as at Oct. 31, 2020.

Problem III

The business assets of Geron and Yumol appear below:

Geron Yumol

Cash P 11,000 P 22,354

Accounts Receivable 234,536 567,890

Inventories 120,035 260,102

Land 603,000 -

Building - 428,267

Furniture and Fixtures 50,345 34,789

Other Assets 2,000 3,600

Total P1,020,916 P1,317,002

Account Payable P 178,940 P 243,650

Notes Payable 200,000 345,000

Geron, Capital 641,976

Yumol, Capital 728,352

Total P1,020,916 P1,317,002

Geron and Yumol agreed to form a partnership contributing their assets and equities subject to
the following adjustments:

a. Accounts receivable of P20,000 in Geron's books and P35,000 in Yumol's are uncollectible.

b. Inventories of P5,500 and P6,700 are worthless in Geron's and Yumol's respective books.

c. Other assets of P2,000 for Geron and P3,600 for Yumol are to be written off.

Requirement:

Prepare the journal entries for the formation of the partnership as at July 1.
ACCTG 12 PARTNERSHIP FORMATION

Problem IV

Mulles, the owner of a successful fertilizer business, felt that it is time to expand operations.
Mulles offered to form a partnership with Lucena, the owner of a nearby warehouse. The
partnership would be called Mulles & Lucena Storage Sales. Lucena accepted Mulles' offer and
the partnership was formed on July 1, 2020.

Presented below is the trial balance for Mulles Fertilizer Supply on June 30, 2020:

Cash P 229,500

Accounts Receivable 2,103,000

Allowance for Uncollectible Accounts P 117,000

Inventory 1,012,500

Prepaid Rent 29,250

Store Equipment 390,000

Accumulated Depreciation 97,500

Notes Payable 330,000

Accounts Payable 505,500

Mulles, Capital 2,714,250

Totals P3,764,250 P3,764,250

The partners agreed to share profits and losses equally and decided to invest an equal amount
in the partnership. Lucena and Mulles agreed that Lucena's land is worth P500,000 and his
building P1,450,000. Lucena is to contribute cash in an amount sufficient to make his capital
account balance equal to Mulles.

An agreement is reached by the two partners on the following items:

a. The accounts receivable are to be valued at P1,799,000 and the allowance for uncollectible
accounts will be eliminated.

b. Inventory is to be decreased by P112,500.

c. The prepaid rent is for the warehouse used by Mulles. All merchandise will be transferred to
Lucena's building. No refund will be received on the unused rent paid in advance.

d. The store equipment has a fair value of P300,000.

e. All the other assets and liabilities are to be transferred at their book values.

Requirement:

Prepare the necessary journal entries in the books of Mulles. Also, record the formation
of the partnership in a new set of books.
ACCTG 12 PARTNERSHIP FORMATION

Problem V

On Apr. 8, 2020, Pascua who has her own retail business and Dela Cruz, decided to form a
partnership wherein they will divide profits in the ratio of 40:60, respectively. The statement of
financial position of Pascua is as follows:

Pascua Marketing
Statement of Financial Position
April 8, 2020

Assets

Cash P 4,000

Accounts Receivable P160,000

Less: Allowance for Uncollectible Accounts 16,000 144,000

Inventory 200,000

Equipment P 50,000

Less: Accumulated Depreciation 10,000 40,000

Total Assets P388,000

Liabilities and Capital

Accounts Payable P 36,000

Pascua, Capital 352,000

Total Liabilities and Capital P388,000

Conditions agreed upon before the formation of the partnership:

a. The accounts receivable of Pascua is estimated to be 70% realizable.

b. The accumulated depreciation of the equipment will be increased by P10,000.

c. The accounts payable will be assumed by the partnership.

d. The capital of the partnership is based on the adjusted capital balance of Pascua.

Dela Cruz is to contribute cash in order to make the partner's capital balances proportionate to
the profit and loss ratio.

Requirement:

1. Prepare the necessary journal entries in the books of Pascua.

2. Prepare the opening journal entries in the books of the partnership.