A Sole Proprietor and an Individual with NO Business Form a Partnership

Espanol Operated a specialty shop that sold fishing equipment and accessories.
post-closing trial balance on Dec. 31) 2007 is as follows:
Fish R Us
Post-Closing Trial Balance
Dec. 31, 2007
Debit Credit
Cash P 36,000
Accounts Receivable 150,000
Allowance for Uncollectible Accounts P 16,000
Inventory 440,000
Equipment 135,000
Accumulated Depreciation 75,000
Accounts Payable 30,000
Espanol, Capital 640,000
P 761,000 P 761,000

Espanol plans to enter into a partnership with trusted associate, Quino, effective Jan. 1, 2008.
Profits or losses will be shared equally. Espanol is to transfer all assets and liabilities of her shop to the pa
Quino will invest cash equal to Espanol’s investment after revaluation.
The agreed values are as follows: accounts receivable (net), P140,OOO;
inventory, P460,OOO; and equipment (net), P124,OOO,
The partnership will operate under the business name of Fish R Us.

Required:
1 Prepare the opening journal entries in the books of the partnership.
2 Prepare the partnership’s statement of financial position as at the date of formation of the partnershi
 Solutions:

1)

Fish
Statement of Fin
ective Jan. 1, 2008. For the month o
d liabilities of her shop to the partnership after revaluation.
Assets
Current Assets

e of formation of the partnership. Non-current Assets

TOTAL ASSETS
Liabilities and Owner's Equity

TOTAL LIABILITIES & OWNER'S EQUITY

Solutions:
Debit Credit
Cash P 36,000
Accounts Receivable 150,000
Inventory 440,000
Equipment 135,000
Allowance for Uncollectible Accounts P 16,000
Accounts Payable 75,000
Espanol, Capital 640,000

Cash 730,000
Quino, Capital 730,000

Fish R Us
Statement of Financial Position
For the month of January, 2008

Assets
Current Assets
Cash P 766,000
Accounts Receivable P 150,000
Less: Allowance for Uncollectible Accounts -10,000 140,000
Inventory 460,000
Total Current Assets 1,366,000
Non-current Assets
Equipment 124,000
TOTAL ASSETS P 1,490,000
Liabilities and Owner's Equity
Accounts Payable P 30,000
Espanol, Capital P 730,000
Quino, Capital 730,000 1,460,000
TOTAL LIABILITIES & OWNER'S EQUITY P 1,490,000