PROBLEMS: Solution:

1. Mr. Sun and Ms. Moon formed a partnership. Their contributions are as follows:

Mr. Sun Ms. Moon

Cash 400,000 -
Accounts receivable 250,000 -
Land 750,000
Equipment 180,000

650,000 1,130,000

Additional information:
1 Only 80% of the AR is deemed collectible
2 The land is stated at original cost. The fair value is P1,000,000
The partnership assumes a 250,000 unpaid mortgage on the land.
3 Ms. Moon acquired the equipment on a long-term financing basis.
Ms. Moon promised to pay the unpaid principal balance of 80,000 using her personal funds.
the equipment is under-depreciated by P30,000

Requirement:
Provide the Journal entry to record the partner's contributions
Solution:
2. The partners agreed to share in profit and losse
Mr. Sun Ms. Moon Partnership A partner should make an additional contribution
Cash 400,000 - 400,000 capital balances to reflect the partner's equal inte
Accounts rec. (250K x 80%) 200,000 - 200,000
Land (at fair value) 1,000,000 1,000,000 Which partner should make an additional contribu
Equipment (180K – 30K) 150,000 150,000
Total 600,000 1,150,000 1,750,000
Mortgage payable – land -250,000 -250,000 Cash
Adjusted capital balances 600,000 900,000 1,500,000 Accounts rec. (250K x 80%)
Land (at fair value)
Equipment (180K – 30K)
Cash 400,000 Total
Accounts receivable 200,000 Mortgage payable – land
Land 1,000,000 Adjusted capital balances
Equipment 150,000
Mortgage payable 250,000 Mr. Sun's capital
Sun, Capital 600,000 Balance
Moon, Capital 900,000
Mr. Sun's capital
Balance

v  Answer: Mr. Sun should make an additional c

rs agreed to share in profit and losses equally. 3. Assume that the partners agreed to have equal interests in th
uld make an additional contribution in order for the partners' equity and profit and losses. The partners' initial capital credits s
es to reflect the partner's equal interests in the partnership agreement using the bonus method. Provide the journal entry

r should make an additional contribution and by how much? Mr. Sun

Cash 400,000
Mr. Sun Ms. Moon Partnership Accounts rec. (250K x 80%) 200,000
sh 400,000 - 400,000 Land (at fair value)
counts rec. (250K x 80%) 200,000 - 200,000 Equipment (180K – 30K)
nd (at fair value) 1,000,000 1,000,000 Total 600,000
uipment (180K – 30K) 150,000 150,000 Mortgage payable – land
tal 600,000 1,150,000 1,750,000 Adjusted capital balances 600,000
ortgage payable – land -250,000 -250,000
justed capital balances 600,000 900,000 1,500,000 Adjusted capital balances 750,000

. Sun's capital 600,000 600,000 1,200,000 Cash 400,000

- 300,000 Accounts receivable 200,000
Land 1,000,000
. Sun's capital 900,000 900,000 1,800,000 Equipment 150,000
(300,000) 0 Mortgage payable
Sun, Capital
r. Sun should make an additional contribution of ₱300,000. Moon, Capital
 Variation to bonus method - cash settlement between the parties
have equal interests in the partnership's 4. Assume that the partners agreed to have their capital accounts initially
ers' initial capital credits should reflect this credited at equal amounts. Cash settlement shall be made between the part
ovide the journal entry
Mr. Sun Ms. Moon
Ms. Moon Partnership Cash 400,000 -
- 400,000 Accounts rec. (250K x 80%) 200,000 -
- 200,000 Land (at fair value) 1,000,000
1,000,000 1,000,000 Equipment (180K – 30K) 150,000
150,000 150,000 Total 600,000 1,150,000
1,150,000 1,750,000 Mortgage payable – land -250,000
-250,000 -250,000 Adjusted capital balances 600,000 900,000
900,000 1,500,000
Adjusted capital balances 750,000 750,000
750,000 1,500,000
Receipt/ payment - 150,000 150,000

Mr. Sun pays Ms. Moon ₱150,000.

This transaction is not recorded in the partnership books.

250,000 Cash 400,000

750,000 Accounts receivable 200,000
750,000 Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Sun, Capital 750,000
Moon, Capital 750,000

Cash 400,000
Accounts receivable 200,000
Sun, Capital 600,000
to record the contributions of Sun
Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Moon, Capital 900,000
to record the contributions of Moon
Moon, Capital 150,000
Sun, Capital 150,000
to equalize the capital balances of the partners
n the parties Variation to bonus method - cash settlement between the parties
tal accounts initially 5. Assume that the partners agreed to have their capital accounts initially
made between the partners credited at equal amounts. A partner shall provide additional investment (or withdraw pa
in order to equalize the balances of the partners' capital accounts
Partnership
400,000 Mr. Sun Ms. Moon Partnership
200,000 Cash 400,000 - 400,000
1,000,000 Accounts rec. (250K x 80%) 200,000 - 200,000
150,000 Land (at fair value) 1,000,000 1,000,000
1,750,000 Equipment (180K – 30K) 150,000 150,000
-250,000 Total 600,000 1,150,000 1,750,000
1,500,000 Mortgage payable – land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000
1,500,000
Adjusted capital balances 750,000 750,000 1,500,000

Receipt/ payment - 150,000 150,000

nership books. v  Mr. Sun shall invest an additional ₱150,000,

while Ms. Moon shall withdraw ₱150,000.
stment (or withdraw part of his investment)

Partnership