Anna and Art decided to form a partnership A=L+E

Balance Sheet

Anna Art Total

Cash 31,000 50,000 81,000
AR 26,000 20,000 46,000
Inventory 32,000 24,000 56,000
Supplies 5,000 5,000
Equip 20,000 24,000 44,000
Acc dep -9,000 -3,000 -12,000
Assets 100,000 120,000 220,000

Payables 28,000 20,000 48,000

Capitals 72,000 100,000 172,000
Liab and equity 100,000 120,000 220,000

a.) Anna and Art's inventory is to be valued at P31,000 and P20,000 respectively.
b.) Accounts recievable of P2,000 in Anna's book and P1,000 in Art's books are uncollectible.
c.) Accrued salaries of P4,000 for Anna and P5,000 for Art are still to be recognized in the books,
d.) Unused office supplies of Anna amounted to P5,000, while that of Art amounted to P1,500.
e.) Unrecorded patent ofP7,000 and prepaid rent of P4,500 are to be recognized in the books of Anna and Art respectitvely.
f.) Anna is to invest or withdraw cash necessary to have a 40% interest in the firm.

Solution FAIR VALUE

40%

Anna Art
Inventory 31,000 22,000
ADA 2,000 1,000
Asalaries 4,000 5,000
Unused OS 5,000 1,500
Patent 7,000
Prep rent 4,500

Adjustments
Anna Art
Inventory -1,000 -2,000 -3,000
AR -2,000 -1,000
Salaries -4,000 -5,000 -9,000
OS 5,000 -3,500 1,500
Patent 7,000
Rent 4,500 4,500
Total 5,000 -7,000 No.1

Anna Art
Original capital 72,000 100,000
Changes 5,000 -7,000

Adjusted capital 77,000 93,000 No.2

Total capital 155,000 (93,000 / 60% or 0.6)

Anna should be 40%
Capital should be of Anna 62,000
Existing of Anna 77,000
Investment (withdrawal) -15,000 No.3

Assets Liabilities Equity

48,000 170,000 *equally adjusted
9,000 Adjustments
15,000 Cash

212,000 57,000 155,000 No.4;5;6 Workback the asset part

Total capital 155,000

60% Art 93,000 No.7
40% Anna 62,000 No.7

Anna Art Total

Cash 31,000 50,000 81,000
AR 24,000 19,000 46,000
Inventory 31,000 22,000 56,000
Supplies 5,000 5,000
Equip 20,000 24,000 44,000
Acc dep -9,000 -3,000 -12,000
Assets 100,000 120,000 220,000

Payables 28,000 20,000 48,000

Capitals 72,000 100,000 172,000
Liab and equity 100,000 120,000 220,000
 Determine:
1. The net adjustments - capital in the book of Anna and Art.
a. Anna, P7,000 net debit; Art, P2,000 net credit
b. Anna, P5,000 net debit; Art, P7,000 net credit
c. Anna, P7,000 net credit; Art, P2,000 net debit
d. Anna, P5,000 net credit; Art, P7,000 net debit

2. The adjusted capital of Anna and Art in their respective books.

a. Anna - P65,000; Art - P102,000
b. Anna - P63,000; Art - P107,000
c. Anna - P77,000; Art - P98,000
d. Anna - P77,000; Art - P93,000

3. The additional investments(withdrawal) made by Anna.

a. P15,000.00
b. P6,666.50
c. P220,333.50
d. P212,000.00
Anna and Art respectitvely.
4. The total assets of the partnership after formation:
a. P235,333.50 c. P220,333.50
b. P230,000.00 d. P212,000.00

5. The total liabilities of the partnership after the formation:

a. P57,000.00 c. P54,000.00
b. 48,000.00 d. P51,000.00

6. The total capital of the partnership after formation:

a. P180,000.00 c. P163,333.50
b. P178,333.50 d. P155,000.00

7. The capital balances of Sarah and Richard in the combined balanced sheet:
a. Anna, P81,250; Art, P72,000 c. Anna, P100,000; Art, P75,000
b. Anna, P81,250; Art, P75,000 d. Anna, P62,000; Art, P93,000

EFFECT
ASSET INCREASE, EQUITY INCREASE
 LIAB INCREASE, EQUITY DECREASE
LIAB DECREASE, EQUITY INCREASE
ASSET DECREASE, EQUITY DECREASE

A L E
-1,000 -1,000
9,000 -2,000 -2,000
-2,000 -2,000
4,000 -4,000
5,000 5,000
-3,500 -3,500
7,000 7,000
ined balanced sheet:
Art, P75,000
Art, P93,000
 DEBIT CREDIT
EQUITY 1,000
INVENTORY 1,000

EQUITY 2,000
AR 2,000

EQUITY 4,000
PAYABLE 4,000
Anna and Art decided to form a partnership A=L+E

Balance Sheet

Anna Art Total

Cash 31,000 50,000 81,000
AR 26,000 20,000 46,000
Inventory 32,000 24,000 56,000
Supplies 5,000 5,000
Equip 20,000 24,000 44,000
Acc dep -9,000 -3,000 -12,000
Assets 100,000 120,000 220,000

Payables 28,000 20,000 48,000

Capitals 72,000 100,000 172,000
Liab and equity 100,000 120,000 220,000

a.) Anna and Art's inventory is to be valued at P31,000 and P20,000 respectively.
b.) Accounts recievable of P2,000 in Anna's book and P1,000 in Art's books are uncollectible.
c.) Accrued salaries of P4,000 for Anna and P5,000 for Art are still to be recognized in the books,
d.) Unused office supplies of Anna amounted to P5,000, while that of Art amounted to P1,500.
e.) Unrecorded patent ofP7,000 and prepaid rent of P4,500 are to be recognized in the books of Anna and Art respectitvely.
f.) Anna is to invest or withdraw cash necessary to have a 40% interest in the firm.

Solution FAIR VALUE

40%

Anna Art
Inventory 31,000 22,000
ADA 2,000 1,000
Asalaries 4,000 5,000
Unused OS 5,000 1,500
Patent 7,000
Prep rent 4,500

Adjustments
Anna Art
Inventory -1,000 -2,000 -3,000
AR -2,000 -1,000
Salaries -4,000 -5,000 -9,000
OS 5,000 -3,500 1,500
Patent 7,000
Rent 4,500 4,500
Total 5,000 -7,000 No.1

Anna Art
Original capital 72,000 100,000
Changes 5,000 -7,000

Adjusted capital 77,000 93,000 No.2

Total capital 155,000 (93,000 / 60% or 0.6)

Anna should be 40%
Capital should be of Anna 62,000
Existing of Anna 77,000
Investment (withdrawal) -15,000 No.3

Assets Liabilities Equity

48,000 170,000 *equally adjusted
9,000 Adjustments
15,000 Cash

212,000 57,000 155,000 No.4;5;6 Workback the asset part

Total capital 155,000

60% Art 93,000 No.7
40% Anna 62,000 No.7

Anna Art Total

Cash 31,000 50,000 81,000
AR 24,000 19,000 46,000
Inventory 31,000 22,000 56,000
Supplies 5,000 5,000
Equip 20,000 24,000 44,000
Acc dep -9,000 -3,000 -12,000
Assets 100,000 120,000 220,000

Payables 28,000 20,000 48,000

Capitals 72,000 100,000 172,000
Liab and equity 100,000 120,000 220,000
 Determine:
1. The net adjustments - capital in the book of Anna and Art.
a. Anna, P7,000 net debit; Art, P2,000 net credit
b. Anna, P5,000 net debit; Art, P7,000 net credit
c. Anna, P7,000 net credit; Art, P2,000 net debit
d. Anna, P5,000 net credit; Art, P7,000 net debit

2. The adjusted capital of Anna and Art in their respective books.

a. Anna - P65,000; Art - P102,000
b. Anna - P63,000; Art - P107,000
c. Anna - P77,000; Art - P98,000
d. Anna - P77,000; Art - P93,000

3. The additional investments(withdrawal) made by Anna.

a. P15,000.00
b. P6,666.50
c. P220,333.50
d. P212,000.00
Anna and Art respectitvely.
4. The total assets of the partnership after formation:
a. P235,333.50 c. P220,333.50
b. P230,000.00 d. P212,000.00

5. The total liabilities of the partnership after the formation:

a. P57,000.00 c. P54,000.00
b. 48,000.00 d. P51,000.00

6. The total capital of the partnership after formation:

a. P180,000.00 c. P163,333.50
b. P178,333.50 d. P155,000.00

7. The capital balances of Sarah and Richard in the combined balanced sheet:
a. Anna, P81,250; Art, P72,000 c. Anna, P100,000; Art, P75,000
b. Anna, P81,250; Art, P75,000 d. Anna, P62,000; Art, P93,000

EFFECT
ASSET INCREASE, EQUITY INCREASE
 LIAB INCREASE, EQUITY DECREASE
LIAB DECREASE, EQUITY INCREASE
ASSET DECREASE, EQUITY DECREASE

A L E
-1,000 -1,000
9,000 -2,000 -2,000
-2,000 -2,000
4,000 -4,000
5,000 5,000
-3,500 -3,500
7,000 7,000
ined balanced sheet:
Art, P75,000
Art, P93,000
 DEBIT CREDIT
EQUITY 1,000
INVENTORY 1,000

EQUITY 2,000
AR 2,000

EQUITY 4,000
PAYABLE 4,000