Partnership Formation – Q3 d.

Accrued expenses of P2,000 and P5,000 in US’ and

IRAN’s books are to be recognized.
1) On March 1, 2020, Cain and Pepe decides to combine their e. Goodwill is to be recognized to equalize their capital
businesses and form a partnership. Statement of financial accounts after the above adjustments.
position on March 1, before adjustments, showed the following: How much is the amount of goodwill to be recognized?
Cain Pepe
Cash 9,000 3,750 5) On March 1, 2020, Bush and Fire decides to combine their
Accounts receivable 18,500 13,500 business to form a partnership. Statement of financial position
Inventories 30,000 19,500 on March 1 before the formation, showed the following:
Furniture and fixtures 30,000 9,000 Bush Fire
(net) Cash 9,000 3,750
Office equipment (net) 11,500 2,750 Accounts receivable 18,500 13,500
Prepaid expenses 6,375 3,000 Inventories 30,000 19,500
Total 105,375 51,500 Furniture and fixtures 30,000 9,000
Accounts payable 45,750 18,000 (net)
Capital 59,625 33,500 Office equipment (net) 11,500 2,750
Total 105,375 51,500 Prepaid expenses 6,375 3,000
They agreed to provide 3% for doubtful accounts after writing Total 105,375 51,500
off 4% of their respective accounts receivables, and also agree Accounts payable 45,750 18,000
that Pepe’s furniture and fixture, whose fair value at the date of Capital 59,625 33,500
partnership formation is P7,000, are underdepreciated by Total 105,375 51,500
P900. If each partner’s share in equity is to be equal to the net They agreed to the following adjustments before the formation:
assets invested, what are the capital accounts of Cain and a. Provide 2% allowance for doubtful accounts.
Pepe, respectively? b. Bush’s furniture should be valued at P31,000, while Fire’s
office equipment is underdepreciated by P250.
2) On July 1, 2020, JB Company and BJ Corporation decided c. Rent expense incurred previously by Bush was not yet
to form a partnership, agreeing to share profits and losses in recorded amounting to P1,000, while salary expense
the ratio of 4:6, respectively. JB plans to contribute a parcel of incurred by Fire was not also recorded amounting to
land that cost him P25,000. BJ, on his part, will contribute P800.
P50,000 cash. The land was sold for P50,000 on July 1, 2020 d. The fair value of inventories amounted to P29,500 for Fire
four hours after JB decided to enter into a partnership with BJ. and P21,000 for Bush.
How much should be recorded in JB partner’s capital account? What is the net (debit) credit adjustment to each partner’s
capital account?
3) Kobe and Bryant have just formed a partnership. Kobe
contributed cash of P126,000 and computer equipment that Questions 6 and 7 are based on the following information:
cost P54,000. The computer had been used in his sole On June 1, 2019, Honda and Yamaha formed a partnership.
proprietorship and had been depreciated to P24,000. The fair Honda is to invest assets at fair value which are yet to be
value of the equipment is P36,000. Kobe also contributed a agreed upon. He is to transfer his liabilities and is to contribute
note payable of P12,000 to be assumed by the partnership. sufficient cash to bring his total capital to P210,000 which is
Kobe is to have 60% interest in the partnership. Bryant 70% of the total capital of the partnership. Details regarding
contributed only P90,000 cash. How much should Kobe’s the book values of Honda’s business assets and liabilities and
additional investment be to bring their initial capital balances their corresponding valuations are:
according to their agreement? Book Fair Agreed
values values valuation
4) On September 1, 2019, the business assets and liabilities of s
US and IRAN were as follows: Accounts receivable 58,000 59,000 60,000
US IRAN Allowance for doubtful 7,000 6,000 5,000
Cash 28,000 62,000 accounts
Accounts receivable 200,000 600,000 Merchandise inventory 98,400 110,000 107,000
Inventories 120,000 200,000 Store equipment 32,500 31,700 32,000
Land 600,000 AD – Store equipment 19,000 21,100 19,300
Building 500,000 Office equipment 27,000 29,000 27,000
Furniture and 50,000 35,000 AD – Office equipment 14,200 8,600 8,600
fixtures Accounts payable 56,000 56,000 56,000
Other assets 2,000 3,000 Yamaha agrees to invest cash of P69,000 and merchandise
Accounts payable 180,000 250,000 valued at current market price.
Notes payable 200,000 350,000 6) How much cash is to be invested by Honda?
US and IRAN agreed to form a partnership contributing their 7) What is the value of the merchandise to be invested by
respective assets and liabilities subject to the following Yamaha?
agreements:
a. Accounts receivable of P20,000 in US’ books and P40,000 8) Bri and Ara are beauty queens. They decided to form a
in IRAN’s books are uncollectible. partnership business of selling their own brand of beauty
b. Inventories of P6,000 and P7,000 are obsolete in US’ and products and named it “BRIARA” Cosmetics. Bri is to
IRAN’s respective books. contribute cash of P500,000 and her laptop computer originally
c. Other assets of P2,000 and P3,000 in US’ and IRAN’s costing P100,000 but has a second hand value of P75,000.
respective books are to be written off. Ara, whose family is selling computers, is to contribute cash of
P250,000 and a brand new computer plus printer with regular
price at P160,000 but which cost their family’s computer
dealership, P140,000. What are the capital balances of each
partner at partnership formation?

-JMR