PARTNERSHIP FORMATION

Answers
 EXERCISE 1

ENTRIES:

Cash 400,000
Dorothy, Capital 400,000

Land and Building 1,250,000

Marks, Capital 1,250,000

MEMO: Spencer is admitted as an industrial partner with 20% share in partnership profits.
 EXERCISE 2

ENTRIES:
a.) October 1,2019
Equipment 550,000
L. Paras, Capital 550,000

Cash 350,000
Land 1,050,000
Mortgage payable 200,000
M. Parayno, Capital 1,200,000
 ENTRIES:

Assuming the partnership will not assume the mortgage payable on the land of M. Parayno.
b.) October 1,2019

Equipment 550,000
L. Paras, Capital 550,000

Cash 350,000
Land 1,050,000
M. Parayno, Capital 1,400,000
 EXERCISE 3

ENTRIES:
Adjusting and closing entries:
a.) December 31,2019
J.Jay Capital 2,400
Allowance for bad debts 2,400

Merchandise Inventory 22,000

J.Jay Capital 22,000

Prepaid Expenses 6,500

J.Jay Capital 6,500

J.Jay Capital 4,000

Accrued liabilities 4,000
 ENTRIES:

Adjusting and closing entries:

a.) December 31,2019
J.Jay Capital 286,100
Allowance for bad debts 2,400
Accrued liabilities 4,000
Accounts payable 62,000
Merchandise Inventory 202,000
Prepaid Expenses 6,500
Cash 26,000
Accounts receivable 120,000
 ENTRIES:

Entries in new set of books

b.) December 31,2019
Merchandise Inventory 202,000
Prepaid Expenses 6,500
Cash 26,000
Accounts receivable 120,000
Allowance for bad debts 2,400
J.Jay Capital = 286,100 (2/3 or
Accrued liabilities 4,000 66.66666%)
` Accounts payable 62,000
J.Jay Capital 286,100 K. Kho = 1/3 of the total
partnership capital
Cash 143,050
286,100/ 0.666666667 =
K. Kho, Capital 143,050 429,150 x 1/3 = 143,050
 EXERCISE 4
ENTRIES:

a.) December 1,2019

Irvin Co, Capital 40,000
Merchandise Inventory 40,000

Irvin Co, Capital 8,000

Allowance for Uncollectible Accounts 8,000

Irvin Co, Capital 40,000

Accumulated Depreciation 40,000

Accumulated Depreciation 60,000

Equipment 60,000
Cash 293,000
Jester Yu, Capital 293,000
b.) The statement of financial position of Irvin Co & Jester Yu Partnership on December 1,2019 at the time of formation is as
follows:
Irvin Co & Jester Yu Partnership
Statement of Financial Position
December 1,2019

Assets
Cash P 653,000

Accounts Receivable P 960,000

Less: Allowance for Uncollectible accounts 48,000 912,000
Merchandise Inventory 280,000
Property, plant and equipment 180,000
Total Assets P 2,025,000

Liabilities and Capital

Accounts payable P 560,000
Irvin Co, Capital 1,172,000
Jester Yu, Capital 293,000
Total Liabilities and Capital P 2,025,000
 EXERCISE 5
ENTRIES:

a.) September 30,2019 - Rob books (Adjusting entries)

R. Rob, Capital 40,000
Allowance for Uncollectible Accounts 40,000

R. Rob, Capital 20,000

Accumulated Depreciation 20,000
 ENTRIES:

a.) September 30,2019 - Jon books (Adjusting entries)

J. Jon, Capital 15,000
Allowance for Uncollectible Accounts 15,000

Accumulated Depreciation 15,000

J.Jon, Capital 15,000

Prepaid Expenses 20,000

J. Jon, Capital 20,000

J.Jon, Capital 25,000

Accrued Expenses 25,000
 ENTRIES:

a.) September 30,2019 - Rob books (Closing entries)

R. Rob, Capital 540,000
Allowance for Uncollectible Accounts 120,000
Accumulated Depreciation 70,000
Accounts payable 400,000
Cash 80,000
Accounts receivable 800,000
Equipment 250,000
 ENTRIES:

a.) September 30,2019 - Jon books (Closing entries)

J. Jon, Capital 685,000
Allowance for Uncollectible Accounts 45,000
Accumulated Depreciation 75,000
Accounts payable 290,000
Accrued Expenses 25,000
Cash 350,000
Accounts receivable 300,000
Equipment 450,000
Prepaid Expenses 20,000
 ENTRIES:

b.) September 30,2019 - New partnership books

Cash 80,000
Accounts receivable 800,000
Equipment 180,000
R. Rob, Capital 540,000
Allowance for Uncollectible Accounts 120,000
Accounts payable 400,000
 ENTRIES:

b.) September 30,2019 - New partnership books

Cash 350,000
Accounts receivable 300,000
Equipment 375,000
Prepaid Expenses 20,000
J. Jon, Capital 685,000
R. Rob, Capital = 540,000
Allowance for Uncollectible Accounts 45,000
Accounts payable 290,000 J. Jon, Capital = 685,000 (
Accrued Expenses 25,000 60%)

685,000/ 0.60= 1,141,666.67 x

R.Rob, Capital 83,333.33 40% = 456,666.67
Cash/ other assets 83,333.33