The statement of financial position of Pedro Castro on October 1, 2016 before accepting Pablo

Bunag as his partner is shown below:

Pedro Castro
Statement of Financial Position
October 1, 2016

Assets
Cash 6,000.00
Notes Receivable 3,000.00
Accounts Receivable 24,000.00
Less: Allowance for Bad Debts 1,000.00 23,000.00
Merchandise Inventory 8,000.00
Furniture and fixtures 6,000.00
Less: Accumulated Depreciation 600.00 5,400.00
Total Assets 45,400.00

Liabilities and Equity

Notes Payable 4,000.00
Accounts Payable 10,000.00
Pedro Castro, Capital 31,400.00
Total Liabilities and Equity 45,400.00

Pablo Bunag offers to invest cash to give him a capital credit equal to one-half (1/2) of Pedro
Castro's capital after giving effect to the adjustment of the items below. Pedro Castro accepts
the offer.
1. The merchandise is to be valued at P7,400.
2. The accounts receivable is estimated to be 95% realizable.
3. The interest accrued on the notes receivable enumerated below is to be reflected.
P1,000, 6% dated July 1, 2016.
P2,000, 6% dated August 1, 2016.

4. Interest accrued at 5% annually from April 1, 2016 on the notes payable is to be recorded.
5. The furniture and fixtures is to be valued at P4,600.
6. Office supplies on hand which have been charged to expense in the past amounted to P400.
These are still to be used by the partnership.

Required:
1. Prepare the necessary journal entries in all the books to record the formation of the
partnership if:
a) The books of Pedro Castro will be retained by the partnership.
b) A new set of books will be used.
2. Prepare the statement of financial position of the partnership.
Roces and Sales, who are engaged in the same type of business, agree to combine their
resources and form a partnership on January 1, 2016. Their post-closing trial balances as of
January 1, 2016 are as follows:

Roces Sales
DR CR DR CR
Cash 14,400.00 4,800.00
Accounts Receivable 57,600.00 72,000.00
Merchandise Inventory 124,800.00 192,000.00
Delivery Equipment 19,200.00 48,000.00
Fixtures 144,000.00 96,000.00
Prepaid Insurance 4,800.00 3,200.00
Accounts Payable 104,000.00 64,000.00
Notes Payable 40,000.00
Accrued Taxes 6,400.00 8,000.00
Allowance for Bad Debts 12,800.00
Accumulated Depreciation -
Delivery Equipment 12,800.00 8,000.00
Accumulated Depreciation -
Fixtures 80,000.00 88,000.00
Capital 161,600.00 195,200.00
364,800.00 364,800.00 416,000.00 416,000.00

It is agreed that the partnership shall acquire the assets and assume the liabilities of the
businesses at the following values:
Roces Sales
Accounts receivable (net) 56,000.00
Fixtures (net) 80,000.00 4,800.00
Merchandise inventory 132,800.00
Goodwill 40,000.00 32,000.00

Required:
Prepare the necessary journal entries in the books of Roces, Sales, and the partnership
assuming that:
a. Roces' books will be used by the partnership.
b. Sales' books will be used by the partnership.
c. A new set of books will be opened by the partnership.