Scribd
Upload
36 views

Formation

1. The net adjustment to B's capital amounted to ?. 2. The net adjustment to A's capital amounted to ?. 3. If the partners agree to bring their capital balances in proportion to their profit/loss ratios, how much will B withdraw or invest in cash?

Uploaded by

James Angkla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
36 views

Formation

1. The net adjustment to B's capital amounted to ?. 2. The net adjustment to A's capital amounted to ?. 3. If the partners agree to bring their capital balances in proportion to their profit/loss ratios, how much will B withdraw or invest in cash?

Uploaded by

James Angkla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

PARTNERSHIP (FORMATION EXERCISE)

On June 1, 2023, A and B decided to pool their assets and form a partnership, to be known as C
partnership. Their statement of financial position on June 1, 2023 before the formation was as follows:

A B
Cash 198,000 316,800
Accounts Receivable 1,296,000 1,440,000
Allowance for doubtful accounts (32,400) (36,000)
Notes Receivable 360,000
Merchandise Inventory 115,200 108,000
Prepaid Rent 36,000
Transportation Equipment 720,000
Accumulated Depreciation (72,000)
Computer Equipment 576,000
Accumulated Depreciation (43,000)
Total Assets 2,584,800 2,397,600

Accounts Payable – Trade 36,000 43,200


Notes Payable 360,000
Capital 2,548,800 1,994,400
Total liabilities and capital 2,584,800 2,397,600

The new partnership is to take over the business assets and assumes business liabilities of the partners.
Capitals of the partners are to be based on net assets invested after the following adjustments:

1. 4% of the accounts receivable of A is estimated to be uncollectible while the accounts receivable


of B is estimated to be 98% realizable.
2. Interest at 15% on notes receivable of A dated April 1, 2023, should be accrued.
3. The selling price less cost to sell of A’s merchandise inventory is 110,000. Three days after
formation, the inventory of B was sold for 100,000.
4. 4/5 if prepaid rent has expired.
5. The transportation equipment of A is appraised at 660,000
6. The replacement cost of the computer of B is determined to be at 600,000
7. Interest at 10% on notes payable of B dates May 1, 2023 should be accrued
8. B had office supplies on hand which have been charged to expense amounting to 8,000. These
are still to be used by the partnership
9. Accrued expense of 6,000 is to be recognized in the books of A.

The partnership agreement provides that A and B share profits and losses of 60% and 40%,
respectively.

1. The net adjustment of B’s capital in its books amounted to?


2. The net adjustment of A’s capital in its books amounted to?
3. Assume the partners further agreed to bring their capital balances proportionate to their profit
and loss ratio, how much will B withdraw or invest in cash?
4. Assume the partners further agreed to bring their capital balances proportionate to their profit
and loss ratio, how much is the cash balance after the additional cash investment (withdrawal)
by A?
5. Assume the partners further agreed to bring their capital balances proportionate to their profit
and loss ratio and they agreed to record and unidentifiable asset (goodwill), how much is the
amount to be debited for the unidentifiable asset (goodwill)?
6. Assume the partners further agreed that only A possess the technical expertise required by the
business, so B agreed to provide 10% of his contributed capital as bonus to A, how much is total
assets of the partnership after formation?

Y and Z establish a partnership to operate a used-furniture business under the name of YZ Furniture, Y
contributes furniture that costs 240,000 and has a fair value of 360,000. Z contributes 120,000 cash and
delivery equipment that costs 160,000 and has a fair value of 120,000. The partners agree to share
profits and losses 60% to Y and 40% to Z.

7. How much is the peso amount of inequity that will result if the initial noncash contributions of
partners are recorded at cost rather than fair value?.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy