Lubi, Julie Marie Anne P

BSA-A1C

Partnership Formation:
Seatwork 1 and 2

Problem 1. – Partner’s Capital and Drawing

The Following transactions are shown in the records of A partner’s capital and drawing
accounts.

A. Capital
1. Beginning balance, P 100,000
2. Correction of understatement of prior year’s income, P10,000.
3. Additional investment, P240,000
B. Drawing
1. Temporary withdrawals, P60,000
2. Partnership debts paid by A, P90,000.
3. Partnership claims collected and retained by A, P20,000
The partnership has a debit income summary balance amounting to P150,000 of which 1/3 is
the share of A.

Required:

A. 1. Cash P 100,000
A, Capital P100,000
To record the business’
beginning balance.
2. Cash P 10,000
A, Capital P 10,000
To record correction of
understatement of prior
year’s income.
3. Cash P 240,000
A, Capital P240,000
To record additional
investment to the business.

1. Prepare the T-Accounts for A’s capital and T-accounts for A’s drawing.
Determine their respective ending balances.

Answer: Problem 1, No. 1

A, Capital A, Drawing .
P 100,000 P60,000 P 90,000
10,000 20, 000
240,000 P80,000 90,000
P 350,000 P 10,000

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 2. Make the journal entries to close the income summary account and to close the drawing
account.

Answer: Problem 1, No. 2

Closing Entries

Closing Income Summary

A’s Capital P 50,000.00

Income Summary P 50,000.00
To close the Income Summary
account to the capital.

Closing Drawings

A’s Drawings P 10,000.00

A’s Capital P 10,000.00
To close the drawing account to the
capital.

Problem 2: Loans to and from Partners

The loans to and from partners account of Cute and Tong Partnership shows the following
ledger:
Loans to and from Partners

01/01 Cute 50,000 03/01 Tong 30,000

08/30 Tong 20,000 05/30 Cute 60,000

Required:
Make the reclassifying journal entries if the partners agree to segregate the “loans to and from
partner’s” account using the “loans to partner’s (each partners name) “loans from partner (each
partner’s name).

Answer Problem 2:

Journal Entries

Date Particulars Debit Credit

01/01 Loans receivable from partner- Cute P 50,000

Cash P 50,000
To record payment of
partner’s advances.

03/01 Cash P 30,000

Loans payable to partner- Tong P 30,000
To record loans from Tong.

05/30 Cash P 60,000

Loans payable to partner- Cute P 60,000
To record loans from Cute.

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 Date Particulars Debit Credit

08/30 Loans receivable from partner- Tong P20,000

Cash P20,000
To record payment of
partner’s advances.

*Separated Loans to and Loans from

Journal Entries

Loans to Partners

Date Particulars Debit Credit

01/01 Loans receivable from partner- Cute P 50,000

Cash P 50,000
To record payment of
partner’s advances.

08/30 Loans receivable from partner- Tong P20,000

Cash P20,000
To record payment of
partner’s advances.

Loans from Partners

Date Particulars Debit Credit

03/01 Cash P 30,000

Loans payable to partner- Tong P 30,000
To record loans from Tong.

05/30 Cash P 60,000

Loans payable to partner- Cute P 60,000
To record loans from Cute.

Problem 3: Issues in Capital Contribution

Mar and Ria agreed to form a partnership with a total agreed capital contribution of P500,000
cash.
Required:
Make the Journal entries for the partner’s respective initial contribution to the partnership
assuming that:

The contribution would be 60% and 40% for Mar and Ria, respectively.

Answer Problem 3:

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 Journal Entries

1. There was no agreement as to how much would be the specific share of each partner.

Date Items Debit Credit

Cash P 250,000
Mar, Capital P 250,000
To record Mar’s initial
contribution to the partnership.

Cash P 250,000
Ria, Capital P 250,000
To record Ria’s initial
contribution to the partnership.

2. The contribution would be 60% and 40% for Mar and Ria, respectively.

Date Items Debit Credit

Cash P 300,000
Mar, Capital P 300,000
To record Mar’s initial
contribution to the partnership.

Cash P 200,000
Ria, Capital P 200,000
To record Mar’s initial
contribution to the partnership

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