PARTNERSHIP FORMATION

Problem II
1. Bonus Method
Cash 100,000.00
Equipment 110,000.00
Note Payable 30,000.00
John, Capital 60,000.00
Jeff, Capital 60,000.00
Jane, Capital 60,000.00

Total Assets 210,000.00

Less: Note Payable 30,000.00
Total Capital 180,000.00
Divide by 3 partners 3 partners
Capital Credit of each partner 60,000.00

2. Goodwill Method
Cash 100,000.00
Equipment 110,000.00
Goodwill 90,000.00
Note Payable 30,000.00
John, Capital 90,000.00
Jeff, Capital 90,000.00
Jane, Capital 90,000.00

Net Assets before Jane's Capital (P210K-30K) 180,000.00

Divide by Capitalist Partners' Interest 2/3
Total Capital Interest 270,000.00
Divide by the Number of partners 3 partners
Capital Credit of each partner 90,000.00

3. Describe appropriateness of each of the above methods.

a. When partners wish to have equal capital credits or contributions after recognizing
the physical attributes of Jane, believing it will be so vital in the new partnership
but do not want to recognize an intangible asset, the bonus method is appropriate
which is perfected by transfering of capital from one or two partners to another.
b. However, if the partners decided to give credit to Jane's skills by recognizing an
intangible asset to equalize their capitals, the GOODWILL Method has to be used.
The recognition of goodwill or any intangible assets will equalize their capitals.
r recognizing
artnership
appropriate
o another.
gnizing an
to be used.
PARTNERSHIP FORMATION
Problem III
1. Preparation of Journal Entries

a. Record initial investments of the partners

Cash 13,000.00
Accounts Receivable 8,000.00
Office Supplies 2,000.00
Office Equipment 30,000.00
Accounts Payable 2,000.00
Tom, Capital 51,000.00
Tom's Investment

Cash 12,000.00
Accounts Receivable 6,000.00
Office Supplies 800.00
Land 30,000.00
Accounts Payable 5,000.00
Mortgage Payable 18,800.00
Julie, Capital 25,000.00
Julie's investment

b. Partners' Withdrawal
Tom, Drawings 15,000.00
Julie, Drawings 12,000.00
Cash 27,000.00

C. Close Income Summary & Drawing Accounts

Tom, Capital 15,000.00
Julie, Capital 12,000.00
Tom, Drawings 15,000.00
Julie, Drawings 12,000.00

Income Summary 50,000.00

Tom, Capital 33,552.63
Julie, Capital 16,447.37
 Capital Fraction Share on NI
Tom 51,000.00 51/76 33,552.63
Julie 25,000.00 25/76 16,447.37
Total 76,000.00 50,000.00

2. Tom and Julie Partnership

Statement of Changes in Partners Capital
For the Year Ending December 31, 20x4

Tom Julie Total

Capital Balance, Beg. 51,000.00 25,000.00 76,000.00
Share on Net Income 33,552.63 16,447.37 50,000.00
Total 84,552.63 41,447.37 126,000.00
Less: Drawings 15,000.00 12,000.00 27,000.00
Capital Balance, End 69,552.63 29,447.37 99,000.00
you may round this off to the nearest peso
you may round this off to the nearest peso
PARTNERSHIP FORMATION
Problem V
1. = Books of the Proprietors
a. Adjusting Entries
Books of J Books of K
a. J, Capital 12,000.00 Merchandise Inventory 6,000.00
Merchandise Inventory 12,000.00 K, Capital 6,000.00

b. J, Capital 7,200.00 K, Capital 3,000.00

Allowance for doubtful accounts 7,200.00 Allowance for doubtful accounts 3,000.00

Required Allowance (P180,000 x 5%) 9,000.00

Less: Allowance balance 6,000.00
Additional Provision 3,000.00

c. Rent Receivable 12,000.00 K, Capital 9,600.00

J, Capital 12,000.00 Salaries Payable 9,600.00

d. NE Interest Receivable 1,200.00

K, Capital 1,200.00
(P60,000 x 16% x 45/360)

e. J, Capital (P32,400 - 24,000) 8,400.00 NE

Office Supplies 8,400.00

f. J, Capital 6,000.00 NE
Accum Depreciation - Equipment 6,000.00

g. NE K, Capital 12,000.00
Accum Depreciation - F & F 12,000.00

h. J, Capital 1,800.00 NE
Interest Payable 1,800.00
(P60,000 x 12% x 3/12)
i. NE Patent 48,000.00
K, Capital 48,000.00

b. Closing Entries
Books of J Books of K
Allow for doubtful accounts 12,000.00 Allow for doubtful accounts 9,000.00
Accum Depreciation - Equip 60,000.00 Accum Depreciation - F & F 36,000.00
Accounts Payable 159,600.00 Accounts Payable 120,000.00
Notes Payable 60,000.00 Salaries Payable 9,600.00
Interest Payable 1,800.00 K, Capital 462,600.00
J, Capital 348,600.00 Cash 54,000.00
Cash 90,000.00 Accounts Receivable 180,000.00
Accounts Receivable 216,000.00 Notes Receivable 60,000.00
Rent Receivable 12,000.00 Interest Receivable 1,200.00
Mdse. Inventory 180,000.00 Mdse. Inventory 150,000.00
Office Supplies 24,000.00 Furniture & Fixtures 144,000.00
Equipment 120,000.00 Patent 48,000.00

2. ) Books of the New Partnership

a. Record the investment of Partner J b. Record the investment of Partner K
Cash 90,000.00 Cash 54,000.00
Accounts Receivable 216,000.00 Accounts Receivable 180,000.00
Rent Receivable 12,000.00 Notes Receivable 60,000.00
Mdse. Inventory 180,000.00 Interest Receivable 1,200.00
Office Supplies 24,000.00 Mdse. Inventory 150,000.00
Equipment 60,000.00 Furniture & Fixtures 108,000.00
Allow for doubtful accounts 12,000.00 Patent 48,000.00
Accounts Payable 159,600.00 Allow for doubtful accounts 9,000.00
Notes Payable 60,000.00 Accounts Payable 120,000.00
Interest Payable 1,800.00 Salaries Payable 9,600.00
J, Capital 348,600.00 K, Capital 462,600.00

Total Partnership Capital (348,600 / 40%) 871,500.00 Cash 60,300.00

Multiply by K's Capital Interest 60% K, Capital 60,300.00
 K's required capital balance 522,900.00
Less: K's adjusted Capital Balance 462,600.00
K's Additional Cash Investment 60,300.00

3. Determination of the following:

a. Net Adjustments in the books of J and K:

Books of
J K
Capital before Adjustments 372,000.00 432,000.00
Capital after Adjustments 348,600.00 462,600.00
Net Adjustments (23,400.00) 30,600.00
Debit Credit

b. Adjusted Capital of J and K in

their respective books 348,600.00 462,600.00

c. Additional cash investment of K

Total Partnership Capital (348,600 / 40%) 871,500.00
Multiply by K's Capital Interest 60%
K's required capital balance 522,900.00
Less: K's adjusted Capital Balance 462,600.00
K's Additional Cash Investment 60,300.00

4. Prepare the Financial Position of the new Partnership immediately after its formation

J and K Partnership
Statement of Financial Position
October 01, 20x4

ASSETS LIABILITIES and CAPITAL

Cash 204,300.00 Liabilities:
Accounts Receivable 396,000.00 Salaries Payable 9,600.00
Less: Allow. For D/A 21,000.00 375,000.00 Accounts Payable 279,600.00
Notes Receivable 60,000.00 Notes Payable 60,000.00
Interest Receivable 1,200.00 Interest Payable 1,800.00
Rent Receivable 12,000.00 Total Liabilities 351,000.00
Merchandise Inventory 330,000.00 Captal:
Office Supplies 24,000.00 J, Capital 348,600.00
Equipment, Net 60,000.00 K, Capital 522,900.00 871,500.00
Furniture and Fixtures, Net 108,000.00
Patent 48,000.00
Total Assets 1,222,500.00 Total Liabilities and Capital 1,222,500.00