MGT111: Principle of Accounting
M.A. Perez
Problem 19: Partnership Formation
A and B formed AB Partnership with the following contributions:
A
Book value
50,000
60,000
B
Fair value
50,000
50,000
Cash
Accounts receivable
Merchandise inventory
Land
100,000
250,000
Building
200,000
150,000
Furniture and fixtures
Accounts payable (assumed by all
partners)
A and B agreed that the merchandise of B should be valued for P140,000.
Required:
Book value
30,000
70,000
150,000
Fair value
30,000
60,000
130,000
250,000
200,000
20,000
Journalized the contribution of A and B partner.
Problem 20: Partnership Division of profit and loss
Paul and Peter formed the 2-P Partnership. The partners’ capital balances during the year are as follows:
3/31
100,000
Paul, Capital
01/01
06/30
09/30
200,000
300,000
400,000
06/30
200,000
Peter, Capital
01/01
07/31
300,000
500,000
Required: Compute the following:
Case 1: Profit distribution and the related journal entry if the partnership has a net income of P 2,000,000.
Case 2: Loss distribution and the related journal entry if the partnership has a net loss of P500,000.
Use the following independent methods of computing profit and loss in both cases above:
1.
Equally
2.
Profit and loss ratio: Paul = 60%; Peter = 40%.
3.
Capital ratios:
a. Beginning capital
b. ending capital
4.
Interest of 6% on the partners’ ending capital, the remainder equally.
5.
Salaries of P15,000 a month for each partner, interest of 10% on ending capital and the remainder 6 and 4 for Paul and Peter, respectively.
Problem 21: Partnership Dissolution (Weygant, et al. page 564)
As at 30 April, partners capita balances in DLM are Donatello $24,500, Leonardo $14,000 and Michaelangelo $10,000. The profit and loss sharing
rations are 5:3:2, respectively. On 1 May, DLMR is formed by admitting Raphael to the firm as a partner.
A. Journalize the admission of Raphael under each of the following independent assumptions.
1. Raphael purchases 50% of Michaelangelo’s ownership interest by paying Michael Angelo $4,500 in cash.
2. Raphael purchases 50% of Leanardo’s ownership interest by paying Leanordo $7,500 in cash.
3. Raphael invests $19,000 cash in the partnership for a 40% ownership interest that includes a bonus to the new partner.
4. Raphael invests $15,000 in the partnership for a 15% ownership interest, and bonuses are given to the old partners.
B. Under number 4 assumption, give the new profit and loss sharing of all the partners after admitting Raphael.