Problem 2-2 (Two Sole Proprietors Form a Partnership; Books of one of the Sole Proprietors to be used by the Partnership) On October 1, 2014, April and Arias decided to pool their assets and form a partnership. The firm is to take over business assets and assume business liabilities; equities are to be based on net assets transferred after the following adjustments: a. Arias' inventory is to be valued at P350,000. b. An allowance for uncollectible accounts of P9,000 and P7,500, respectively should be set up. Accrued expenses of P21,000 are to be recognized on April's books. c. d. Arias is to contribute sufficient cash to give him a 60% interest in the new firm. Statements of financial position for April and Arias on October 1 before adjustments are presented below. April P 187,500 450,000 400,000 250,000 ( 112,500) P 1,175,000 Arias P 112,500 375,000 300,000 300,000 (37,500) P 1,050,000 Cash Accounts Receivable Merchandise Inventory Equipment Accumulated Depreciation Total Assets Accounts Payable Сapital Total Liabilities and Capital 345,000 830,000 P 250,000 800,000 P 1,050.000 P 1,175,000 Instructions: 1. Give the entries to adjust and close the books of April. 2. Give the entries required on the books of Arias upon the formation of the partnership. 3. Prepare a statement of financial position for the new partnership of April and Arias.
Problem 2-2 (Two Sole Proprietors Form a Partnership; Books of one of the Sole Proprietors to be used by the Partnership) On October 1, 2014, April and Arias decided to pool their assets and form a partnership. The firm is to take over business assets and assume business liabilities; equities are to be based on net assets transferred after the following adjustments: a. Arias' inventory is to be valued at P350,000. b. An allowance for uncollectible accounts of P9,000 and P7,500, respectively should be set up. Accrued expenses of P21,000 are to be recognized on April's books. c. d. Arias is to contribute sufficient cash to give him a 60% interest in the new firm. Statements of financial position for April and Arias on October 1 before adjustments are presented below. April P 187,500 450,000 400,000 250,000 ( 112,500) P 1,175,000 Arias P 112,500 375,000 300,000 300,000 (37,500) P 1,050,000 Cash Accounts Receivable Merchandise Inventory Equipment Accumulated Depreciation Total Assets Accounts Payable Сapital Total Liabilities and Capital 345,000 830,000 P 250,000 800,000 P 1,050.000 P 1,175,000 Instructions: 1. Give the entries to adjust and close the books of April. 2. Give the entries required on the books of Arias upon the formation of the partnership. 3. Prepare a statement of financial position for the new partnership of April and Arias.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter12: Accounting For Partnerships And Limited Liability Companies
Section: Chapter Questions
Problem 3PA
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
Transcribed Image Text:Problem 2-2 (Two Sole Proprietors Form a Partnership; Books of one of the Sole
Proprietors to be used by the Partnership)
On October 1, 2014, April and Arias decided to pool their assets and form a partnership.
The firm is to take over business assets and assume business liabilities; equities are to be
based on net assets transferred after the following adjustments:
a.
Arias' inventory is to be valued at P350,000.
An allowance for uncollectible accounts of P9,000 and P7,500, respectively should
be set up.
b.
Accrued expenses of P21,000 are to be recognized on April's books.
с.
d.
Arias is to contribute sufficient cash to give him a 60% interest in the new firm.
Statements of financial position for April and Arias on October 1 before adjustments are
presented below.
Arias
April
P 187,500
450,000
Cash
P 112,500
Accounts Receivable
375,000
Merchandise Inventory
Equipment
Accumulated Depreciation
400,000
250,000
( 112,500)
P 1,175,000
300,000
300,000
( 37,500)
P 1,050,000
Total Assets
P 345,000
Accounts Payable
Сapital
Total Liabilities and Capital
P 250,000
800,000
P 1,050.000
830,000
P 1,175,000
Instructions:
1.
Give the entries to adjust and close the books of April.
2. Give the entries required on the books of Arias upon the formation of the
partnership.
3.
Prepare a statement of financial position for the new partnership of April and Arias.
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