FINANCIAL ACCOUNTING & REPORTING 24th Edition (2022) - Zeneida C

Chapter 2: Partnership Formation

Exercise 1
Ex. 1 a. Oct-02 Nina and Nona invested P500,000 an
Oct-04
Nona invested an additional amount of P200,00 to c

Oct-31
Nina and Nona received their monthly salary of P10,000 as per
Nov-30
Nina and Nona received their monthly salary of P10,000 as per
Dec-15 The partnership borrowed some ca
Dec-28
Nina and Nona received their monthly salary of P10,000 as per
Dec-31
The partnership close the nominal accounts and summarized a profi
drawing accoun

b.
The Articles of Co-Partnership contained the required capital of P1,000,000, P500,000 agreed capital to each p
salary of P10,000 per month.
c. Dec-31 Income Summary
Nina, Capital
Nona, Capital
d. Nina and Nona Partnership
Statement of Financial Position
October - December 31, 2021

Partners' Equity
Nina, Capital
Nina, Drawing
Nona, Capital
Nona, Drawing
Total Liabilites and Partners Equity

Exercise 2
Cash
Land
Building
Amy Capital
Andy,Capital

Exercise 3
a. Cash
Land
Building
Elmer, Capital
Edam, Capital
Notes Payble
 Elmer,Drawing
Elmer, Draw
Cash

Revenue
Income Summary

Income Summary
Operating Expense

Income Summary
Tax Payable

income Summary
Elmer, Drawing
Edam, Drawing

b. Elmer and Edam Partnership

Statement of Changes in Partners' Equity
December 31, 2021

Capital
Share in Profit
Balances
Withdrawal
Total Partners' Equity

Exercise 4
Merchandise Inventory
Equipment
Furniture and Fixtures
Cash
Notes Payable
Eba, Capital
Clara, Capital

Exercise 5

Inventory
Winston, Capital

Equipment
Notes Payable
Enriquez, Capital
 Cash
Furniture and Fixtures
Rubio, Capital

Exercuse 6
Blanco & Delrio Partnership
Statement of Changes in Partnerships' Equity
December 31, 20XX

Capital nvestment
Shhare in Net Income
Balances
Drawing
Balances
Additional Investments
Total Equity

Computation for Net Income:

Consultancy Fees Reveneus
Operating Expense
Tax Payable

b.

They both withdrew huge amount of cash which eroded their investments and seems the capital agreement is u

Exercuse 7
Reyes
a. Cash
Accounts Receivable
Merchandise Inventory

Ortiz
Cash
Furniture

Flores
Equipment
Notes Payable

b. Ortiz ₱ 75,000
Fkorez ₱ 55,000
c. Cash
Accounts Receivable
Merchandise Inventory
Reyes, Capital

Cash
Furniture and Fixture
Ortiz, Capital

Cash
Equipment
Notes Payable
Flores, Capital

Exercuse 8
a.
Accounts Receivable Net
Realizable Value
Decreased Capital by

10% of Merchandise Inventory

Furniture & Equipment

75%of F&E

Allowance for Depreciation

Decreased Capital by

Taverna, Capital
Total Decrease in Taverna, Capital
Adjeusted Capital

b. Taverna,Capital
Allowance for Bad Debts

Taverna,Capital
Merchandise Inventory

Taverna, Capital
Allowance for Depreciation

Allowance for Bad Debts

Allowance for Depreciation
Accounts Payable
Taverna, Capital
Cash
Account Receivable
 Merchandise Inventory
Furniture and Equipment

b. Taverna,Capital
Cash Balance
Taverna's Capital Investment

c. Cash
Accounts Receivable
Merchandise Inventory
Furniture & Equipment
Allowance for Bad Debts
Accounts Payable
Taverna, Capital
Elchico, Capital
Baylon, Capital

Exercise 9
a. Furniture & Fixtures
Equipments
Gilmore, Capital

b. Gilmore
Agreed Capital ₱ 250,000
Capital Contribution ₱ 300,000
-₱ 50,000

Cash
Raymond, Capital

Gilmore, Capital
Raymond, Capital

Exercise 10
a. Cash
Accounts Receivable
Inventory
Land
Building
Accounts Payable
Mortgage Payable
Gonzalez, Capital

b. Agreed Capital
Acutal Contributions

Cash
 Gonzalez, Capital
Espiritu, Capital

Agreed Capital
Acutal Contributions

Ned's Investments
Casj
Espiritu, Capital

May's Revaluation
Gonzales, Capital
Other Assets

Exercise 11
Adjusted Capital
Alice From Adjustment
Accounts Receivable ₱ 29,600 -₱ 4,600
Equipment ₱ 26,400 -₱ 4,400
Total ₱ 56,000 -₱ 9,000

Alex From Adjustment

Cash ₱ 25,000 ₱ -
Inventory ₱ 30,000 -₱ 10,000
Total ₱ 55,000 -₱ 10,000

1 Acgreed Capital Capital Contribution

Alice ₱ 47,000 ₱ 47,000
Alex ₱ 47,000 ₱ 45,000
Total ₱ 94,000 ₱ 92,000

Equipment ₱ 22,000
Accounts Receivable ₱ 32,000
Allowance for Impairment
Alice Capital

Cash ₱ 27,000
Inventory ₱ 20,000
Alex,Capital

2 Acgreed Capital Capital Contribution

Alice ₱ 67,500 ₱ 47,000
Alex ₱ 45,000 ₱ 45,000
Total ₱ 112,500 ₱ 92,000
 Equipment ₱ 22,000
Accounts Receivable ₱ 32,000
Goodwill ₱ 20,500
Allowance for Impairment
Alice Caputal

Cash ₱ 25,000
Inventory ₱ 20,000
Alex,Capital

3 Acgreed Capital Capital Contribution

Alice ₱ 46,000 ₱ 47,000
Alex ₱ 46,000 ₱ 45,000
Total ₱ 92,000 ₱ 92,000

Equipment ₱ 22,000
Accounts Receivable ₱ 32,000
Allowance for Impairment
Alice Capital

Cash ₱ 25,000
Inventory ₱ 20,000
Alex,Capital

Alixe, Capital ₱ 1,000

Alixe, Capital

4 Acgreed Capital Capital Contribution

Alice ₱ 45,000 ₱ 47,000
Alex ₱ 45,000 ₱ 45,000
Total ₱ 90,000 ₱ 92,000

Equipment ₱ 20,000
Accounts Receivable ₱ 32,000
Allowance for Impairment
Alice Capital

Cash ₱ 25,000
Inventory ₱ 20,000
Alex,Capital

b.1 AA Partners
Statement of Financial Position
January 1, 20xx

ASSETS
Cash ₱ 27,000
Accounts Receivable ₱ 32,000
 Less: Allowance for Impairment (7,000) 25,000
Inventory 20,000
Equipment 22,000
Total Assets ₱ 94,000

LIABILITES AND PARTNERS' EQUITY

Partners' Equity
Alice, Capital ₱ 47,000
Alex, Capital 47,000
Total Liabilites and Partners' Equity ₱ 94,000

b.2 AA Partners
Statement of Financial Position
January 1, 20xx

ASSETS
Cash ₱ 25,000
Accounts Receivable ₱ 32,000
Less: Allowance for Impairment (7,000) 25,000
Inventory 20,000
Equipment 22,000
Goodwill 20,500
Total Assets ₱ 112,500

LIABILITES AND PARTNERS' EQUITY

Partners' Equity
Alice, Capital ₱ 67,500
Alex, Capital 45,000
Total Liabilites and Partners' Equity ₱ 112,500

b.3 AA Partners
Statement of Financial Position
January 1, 20xx

ASSETS
Cash ₱ 25,000
Accounts Receivable ₱ 32,000
Less: Allowance for Impairment (7,000) 25,000
Inventory 20,000
Equipment 22,000
Total Assets ₱ 92,000

LIABILITES AND PARTNERS' EQUITY

Partners' Equity
Alice, Capital ₱ 46,000
Alex, Capital 46,000
Total Liabilites and Partners' Equity ₱ 92,000
b.4 AA Partners
Statement of Financial Position
January 1, 20xx

ASSETS
Cash ₱ 25,000
Accounts Receivable ₱ 32,000
Less: Allowance for Impairment (7,000) 25,000
Inventory 20,000
Equipment 20,000
Total Assets ₱ 90,000

LIABILITES AND PARTNERS' EQUITY

Partners' Equity
Alice, Capital ₱ 45,000
Alex, Capital 45,000
Total Liabilites and Partners' Equity ₱ 90,000

Exercise 12
a. Solis, Capital ₱ 50,000
Accounts Receivable

Soilis, Capital 67,500

Allowance for Bad Debts

Solis, Capital 15,000

Supplies Inventory

Solis, Capital 5,000

Accumulated Depreciation - F&E

Solis, Capital 5,000

Tax Payable

Solic, Capital 80,000

Accumulated Depreciatio - Printing Equipment

Solis, Capital ₱ 815,000

Capital decreased by 222,500
Solis, Adjusted Capital ₱ 592,500

b. Agred Capital Capital Contribution

Solis ₱ 600,000 ₱ 592,500
Prieto 400,000 407,500
Total ₱ 1,000,000 ₱ 1,000,000

c. Cash ₱ 407,500
Solis, Capital
 Prieto, Capital

Exercise 13
Marlo's Capital ₱ 90,000 Adjustment:
Decreased Capital by (2,000) Accounts Receivable
Adjusted ₱ 88,000 Inventory
Plant and Equipment

Agred Capital Capital Contribution

Marlo ₱ 88,000 ₱ 88,000
Bello 132,000 100,000
Total ₱ 220,000 -₱ 188,000

a. Cash ₱ 110,000
Accounts Receivable 38,850
Inventory 51,000
Plant and Equipment 10,000
Goodwill 32,000
Allowance for Bad Debts ₱ 1,850
Accounts Payable 20,000
Marlo,Capital 88,000
Bello, Capital 132,000

b. Marlo and Bello Partnership

Statement of Financial Position
October 1, 2019

ASSETS
Cash ₱ 110,000
Accounts Receivable ₱ 38,850
Less: Allowance for Impairment (1,850) 37,000
Inventory 51,000
Equipment 10,000
Goodwill 32,000
Total Assets ₱ 240,000

LIABILITES AND PARTNERS' EQUITY

Accounts Payable ₱ 20,000

Partners' Equity
Marlo, Capital 88,000
Bello, Capital 132,000
Total Liabilites and Partners' Equity ₱ 240,000

Exercise 14
a. Adjustments Steve Guy
Allowance for Bad Debts ₱ 5,000
 Accumulated Depreciation 15,000 ₱ 15,000
Merchandise Inventory 10,000
Beauty Supplies 10,000
Accrued Interest 2,500
₱ 32,500 ₱ 25,000

Steve, Capital ₱ 112,500

Guy, Capital 91,000
₱ 203,500

b. Agreed Capital Capital Contribution

Steve ₱ 100,000 ₱ 112,500
Guy 100,000 91,000
₱ 200,000 ₱ 203,500

Guy, Cash investment ₱ 9,000

Steve, Withdrawal 12,500

c. Cash ₱ 12,500
Accounts Receivable 25,000
Merchandise Inventory 70,000
Supplies Inventory 15,000
Furniture and Equipment 35,000
Allowance for Bad Debts ₱ 5,000
Accounts Payable 20,000
Notes Payable 30,000
Accrued Interest 2,500
Steve Capital 100,000

Cash ₱ 20,000
Supplies Inventory 15,000
Furniture and Equipment 70,000
Accounts Payable ₱ 5,000
Guy, Capital 100,000

d. Health and Beauty Shop

Statement of Financial Position
Decemebr 31, 20xx

ASSETS
Cash ₱ 32,500
Accounts Receivable ₱ 25,000
Less: Allowance for Impairment (5,000) 20,000
Merchandise Inventory 70,000
Supplies Inventory 30,000
Furniture and Equipment 105,000
Total Assets ₱ 257,500
 LIABILITES AND PARTNERS' EQUITY
Accounts Payable ₱ 25,000
Notes Payable 30,000
Accrued Interest 2,500
Partners' Equity
Marlo, Capital 100,000
Bello, Capital 100,000
Total Liabilites and Partners' Equity ₱ 257,500

e. Agreed Capital Capital Contribution

Steve ₱ 101,750 ₱ 112,500
Guy 101,750 91,000
₱ 203,500 ₱ 203,500

Cash ₱ 25,000
Accounts Receivable 25,000
Merchandise Inventory 70,000
Supplies Inventory 15,000
Furniture and Equipment 35,000
Allowance for Bad Debts ₱ 5,000
Accounts Payable 20,000
Notes Payable 30,000
Accrued Interest 2,500
Steve Capital 112,500

Cash ₱ 11,000
Supplies Inventory 15,000
Furniture and Equipment 70,000
Accounts Payable ₱ 5,000
Guy, Capital 91,000

Steve,Capital ₱ 10,750
Guy,Capital ₱ 10,750

Exercise 15
a. Adjustment Dan Jude
Net Realizable, Accouts Receivable -₱ 1,000 -₱ 1,000
Inventory 4,000 2,000
Equipment 5,000 2,000
Increase by ₱ 8,000 ₱ 3,000

Cash ₱ 19,500
Accounts Receivable 15,000
Inventory 32,000
Equipment 31,000
Allowance for Doubtful Accounts ₱ 3,500
Accounts Payable 45,000
Dan, Capital 49,000
 Cash 16,000
Accounts Receivable 23,000
Inventory 15,000
Equipment 19,000
Allowance for Doubtful Accounts 5,000
Accounts Payable 37,000
Jude, Capital 31,000

b. Dan Jude
Agree Capital ₱ 49,000 ₱ 29,400
Contributed Capital 49,000 31,000
Total ₱ - -₱ 1,600

Jude, Investment -₱ 1,600

c. Dan Jude
Agree Capital ₱ 48,000 ₱ 32,000
Contributed Capital 49,000 31,000
Total -₱ 1,000 ₱ 1,000

Dan, Capital ₱ 1,000

Jude, Capital ₱ 1,000

Exercise 16
Book Value Adjustment
Cash ₱ 17,500
Accounts Receivable 40,000
Allowance for Bad Debts 3,500 ₱ 1,500
Notes Receivable 50,000
Interest Receivable 4,800
Merchandise Inventory 180,000 (35,000)
Store Furniture & Equipment 300,000
Accumulated Depreciation 11,000
Accounts Payable 50,000
₱ 523,000 -₱ 31,700

b. Dan Jude
Agree Capital ₱ 400,000 ₱ 400,000
Contributed Capital 400,000 491,300
Total ₱ 800,000 -₱ 91,300

Allowance for Bad Debts -₱ 1,500

Accrued Interest 4,800
Merchadise Inventory (35,000)
Accumulated Depreciation -₱ 91,300
Decrease Capital by (123,000)
 Lee, Capital ₱ 523,000
Lee, Adjusted Capital 400,000

c.1 Lee, Capital -₱ 1,500

Allowance for Bad Debts -₱ 1,500

Accrued Interest 4,800

Lee, Capital 4,800

Lee, Capital 35,000

Merchandise Inventory 35,000

Lee, Capital 91,300

Accmulated Depreciation 91,300

Allowance for Bad Debts 5,000

Accumulated Depreciation 102,300
Accounts Payable 50,000
Lee, Capital 400,000
Cash 17,500
Accounts Receivable 40,000
Notes Receivable 50,000
Interest Receivable 4,800
Merchandise Inventory 145,000
Store Furniture and Equipment 300,000

c.2 Cash 17,500

Accounts Receivable 40,000
Notes Receivable 50,000
Interest Receivable 4,800
Merchandise Inventory 145,000
Store Furniture and Equipment 197,700
Allowance for Bad Debts 5,000
Accounts Payable 50,000
Lee, Capital 400,000

c.3 Cash 400,000

Lou, Capital 400,000

Exercise 17
Dan Jude
Agree Capital ₱ 400,000 ₱ 400,000
Contributed Capital 491,300 308,700
Total -₱ 91,300 ₱ 91,300

1 Cash ₱ 17,500
Accounts Receivable 40,000
Notes Receivable 50,000
 Interest Receivable 4,800
Merchandise Inventory 145,000
Store Furniture and Equipment 289,000
Allowance for Bad Debts ₱ 5,000
Accounts Payable 50,000
Lee, Capital 491,300

2 Cash 308,700
Lou, Capital 308,700

Lee, Capital 91,300

Lou, Capital 91,300

LEGAL AND ETHICAL ISSUES

Q;
1. The properties will belong to the partnership. The partners may use it to the extent of doing operations
2. The profits willl be distributed to the partners according to their profit and loss ratio. If not stipulated, the pro
be distributed equally. Hence, the profit belongs to the partners.

ETHICAL ISSUES
Q; 1. The right of the partners were violated. A partner has the right to open the books even if he was restricted by
managing partner.

2.Investors or in this case, the partners must be informed of the operations of the partnership.

ACCOUNTING ISSUES
Q 1 Land 300,000
Fernandez, Capital

Cash 650,000
Land
Gain from Sale

Fernandez, Capital 300,000

Share from Sale 116,667
Fernandez, Equity ₱ 416,667

2 Land 600,000
Fernandez, Capital

Cash 650,000
Land
Gain from Sale

Fernandez, Capital 600,000

Share from Sale 16,667
Fernandez, Equity ₱ 616,667
 3
The second option is more fair and equitable since it recognized the
supposed value that raised the equity of fernandez that when land i
realized, it become more advantageous for him.

This is called the cost principle,since in the context of forming of

partnership, the asset must be recorded at fair or appraised value si
gain/profits or losses from the asset will be distributed to the partne

TAX ISSUES
a. 150,000
70%
Merchandise or businesses other than ₱ 105,000
general professional partnership is subject
to 30% since it is an income tax unlike for
professionals wehre their share profits b. ₱ 150,000
includes tax.
4th Edition (2022) - Zeneida Cruz Veda Manuel
rship Formation
se 1
and Nona invested P500,000 and P300,000 respectively.
dditional amount of P200,00 to complete her agreed capital of P500,000.

monthly salary of P10,000 as per the legal provision of the Article of Co-Partnership

monthly salary of P10,000 as per the legal provision of the Article of Co-Partnership
e partnership borrowed some cash to Nona for P50,000

monthly salary of P10,000 as per the legal provision of the Article of Co-Partnership

accounts and summarized a profit of P200,000 and equally distributed to each partner's
drawing accounts.

500,000 agreed capital to each partner having a 1;1 profit and loss ratio with a montly
10,000 per month.
P200,000
P100,000
P100,000
Nona Partnership
of Financial Position
December 31, 2021

₱ 500,000.00
₱ 170,000.00 ₱ 670,000.00
₱ 500,000.00
₱ 170,000.00 ₱ 670,000.00
₱ 1,340,000.00

se 2
₱ 3,000,000
₱ 3,500,000
₱ 2,500,000
₱ 6,000,000
₱ 3,000,000

se 3
₱ 900,000
₱ 300,000
₱ 500,000
₱ 900,000
₱ 600,000
₱ 200,000
 ₱ 30,000
₱ 25,000
₱ 55,000

₱ 375,000
₱ 375,000

₱ 125,000
₱ 125,000

₱ 75,000
₱ 75,000

₱ 175,000
₱ 105,000
₱ 70,000

Edam Partnership
anges in Partners' Equity
mber 31, 2021

Elmer Edam
₱ 900,000 ₱ 600,000
₱ 105,000 ₱ 70,000
₱ 1,005,000 ₱ 670,000
-₱ 30,000 -₱ 25,000
₱ 975,000 ₱ 645,000

se 4
₱ 100,000
₱ 400,000
₱ 240,000
₱ 110,000
₱ 150,000
₱ 350,000
₱ 350,000

se 5

₱ 125,000
₱ 125,000

₱ 230,000
₱ 100,000
₱ 130,000
 ₱ 200,000
₱ 150,000
₱ 350,000

se 6
Delrio Partnership
nges in Partnerships' Equity
mber 31, 20XX

Blanco Delrio
₱ 800,000 ₱ 900,000
₱ 112,000 ₱ 168,000
₱ 912,000 ₱ 1,068,000
-₱ 200,000 -₱ 280,000
₱ 712,000 ₱ 788,000
₱ 150,000
₱ 862,000 ₱ 788,000

₱ 600,000
₱ 200,000 ₱ 400,000
70%
₱ 280,000

seems the capital agreement is unclear.

se 7
Book Value Fair Vlaue
₱ 80,000 ₱ 80,000
₱ 50,000 ₱ 40,000
₱ 120,000 ₱ 70,000
₱ 250,000 ₱ 190,000

Book Value Fair Vlaue

₱ 40,000 ₱ 40,000
₱ 150,000 ₱ 75,000
₱ 190,000 ₱ 115,000

Book Value Fair Vlaue

₱ 350,000 ₱ 210,000
₱ 150,000 ₱ 75,000
₱ 200,000 ₱ 135,000

Ortiz and Flores should make additional investments of P75,000 and

P55,000, respectively.
 ₱ 80,000
₱ 40,000
₱ 70,000
₱ 190,000

₱ 115,000
₱ 75,000
₱ 190,000

₱ 55,000
₱ 210,000
₱ 75,000
₱ 190,000

se 8

₱ 78,000
₱ 70,000
₱ 8,000

₱ 12,000

₱ 90,000
-₱ 67,500
₱ 22,500
-₱ 18,000
₱ 4,500

₱ 250,000
-₱ 24,500
₱ 225,500

₱ 8,000
₱ 8,000

₱ 12,000
₱ 12,000

₱ 4,500
₱ 4,500

₱ 10,000
₱ 22,500
₱ 40,000
₱ 225,500
₱ 20,000
₱ 80,000
 ₱ 108,000
₱ 90,000

₱ 225,500
-₱ 20,000
₱ 205,500 ₱ 102,750

₱ 205,500
₱ 80,000
₱ 108,000
₱ 67,500
₱ 10,000
₱ 40,000
₱ 205,500
₱ 102,750
₱ 102,750

se 9
₱ 40,000
₱ 260,000
₱ 300,000

Raymond Total
₱ 250,000 ₱ 500,000
₱ 200,000 ₱ 500,000
₱ 50,000 ₱ -

₱ 200,000
₱ 200,000

₱ 50,000
₱ 50,000

e 10
₱ 34,000
₱ 76,000
₱ 125,000
₱ 300,000
₱ 240,000
₱ 25,000
₱ 175,000
₱ 675,000
May Ned Total
₱ 656,250 ₱ 218,750 ₱ 875,000
₱ 675,000 ₱ 200,000 ₱ 875,000
-₱ 18,750 ₱ 18,750 ₱ -

₱ 200,000
 ₱ 18,750
₱ 218,750

May Ned Total

₱ 600,000 ₱ 200,000 ₱ 800,000
₱ 675,000 ₱ 200,000 ₱ 875,000
-₱ 75,000 ₱ - -₱ 75,000

₱ 200,000
₱ 200,000

₱ 75,000
₱ 75,000

e 11

To
₱ 25,000
₱ 22,000
₱ 47,000

To
₱ 25,000
₱ 20,000
₱ 45,000

Additional Investments
₱ -
₱ 2,000
₱ 2,000

₱ 7,000
₱ 47,000

₱ 47,000

Goodwill
₱ 20,500
₱ -
₱ 20,500
₱ 7,000
67500

₱ 45,000

Bonus
-₱ 1,000
₱ 1,000
₱ -

₱ 7,000
₱ 47,000

₱ 45,000

₱ 1,000

Revaluation
-₱ 2,000
₱ -
-₱ 2,000

₱ 7,000
₱ 45,000

₱ 45,000
₱ 50,000

67,500

15,000

5,000

5,000

80,000

Additional Cash
₱ 7,500
(7,500)
₱ -

₱ 7,500
 400,000

Adjustment:
-₱ 1,000
1,000
(2,000)
-₱ 2,000

GoodWill
₱ -
32,000
₱ 32,000
Additional Investment
-₱ 12,500
9,000
-₱ 3,500
Bonus
-₱ 10,750
10,750
₱ -
Total
₱ 78,400
80,000
-₱ 1,600

Total
₱ 80,000
80,000
₱ -

Adjusted Balances
₱ 17,500
40,000
5,000
50,000
4,800
145,000
300,000
11,000
50,000
₱ 491,300

Revaluation
₱ 800,000
891,300
-₱ 91,300
 Revaluation
₱ 800,000
800,000
₱ -
extent of doing operations
ss ratio. If not stipulated, the profits will

ooks even if he was restricted by the

he partnership.

300,000

300,000
350,000

600,000

600,000
50,000
equitable since it recognized the
ty of fernandez that when land is
eous for him.

e in the context of forming of

rded at fair or appraised value since the
t will be distributed to the partners.