Blake Kredell owns and operates a retail business called Blake's Camera Shop. His post closing trial balance on December 31, 20 21, is provided below. Blake plans to enter into a partnership with Carmen Santos, effective January 2022. Profits and losses will be shared equally. Blake will transfer all assets and liabilities of his store to the partnership, after revaluation. Santos will invest cash equal to Blake's investment after revaluation. The agreed values an Accounts Receivable (net), P7,500; Merchandise Inventory, P27,000; and Store Equipment, P8,000. The partnership will operate under the name Picture Perfect. BLAKE'S CAMERA SHOP Post closing Trial Balance December 31, 2021 ACCOUNT NAME DEBIT CREDIT Cash P 6,000 Accounts Receivable 8,000 Allowance for Doubtful Accounts P 200 Merchandise Inventory 26,000 Store Equipment 12,000 Accumulated Depreciation-Store Equipment 8,000 Accounts Payable 5,000 Blake Kredell, Capital 38,800 P 52,000 P 52,000 Totals In recording the partners' investments: 1. Allowance for Doubtful Accounts will be (1) credited (debited or credited?) for (2) 500 (amount) 2. Store Equipment will be (3) debited (debited or credited?) for (4) 8000 (amount) 3. Kredell, Capital will be (5) credited (debited or credited?) for (6) 43500 (amount) 4. Santos, Capital will be (7) Credited (debited or credited?) for (8) 43500 (amount) 5. Cash balance after recording the partners' investments will be (9) 49500 (amount)
Blake Kredell owns and operates a retail business called Blake's Camera Shop. His post closing trial balance on December 31, 20 21, is provided below. Blake plans to enter into a partnership with Carmen Santos, effective January 2022. Profits and losses will be shared equally. Blake will transfer all assets and liabilities of his store to the partnership, after revaluation. Santos will invest cash equal to Blake's investment after revaluation. The agreed values an Accounts Receivable (net), P7,500; Merchandise Inventory, P27,000; and Store Equipment, P8,000. The partnership will operate under the name Picture Perfect. BLAKE'S CAMERA SHOP Post closing Trial Balance December 31, 2021 ACCOUNT NAME DEBIT CREDIT Cash P 6,000 Accounts Receivable 8,000 Allowance for Doubtful Accounts P 200 Merchandise Inventory 26,000 Store Equipment 12,000 Accumulated Depreciation-Store Equipment 8,000 Accounts Payable 5,000 Blake Kredell, Capital 38,800 P 52,000 P 52,000 Totals In recording the partners' investments: 1. Allowance for Doubtful Accounts will be (1) credited (debited or credited?) for (2) 500 (amount) 2. Store Equipment will be (3) debited (debited or credited?) for (4) 8000 (amount) 3. Kredell, Capital will be (5) credited (debited or credited?) for (6) 43500 (amount) 4. Santos, Capital will be (7) Credited (debited or credited?) for (8) 43500 (amount) 5. Cash balance after recording the partners' investments will be (9) 49500 (amount)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blake Kredell owns and operates a retail business called Blake's Camera Shop. His post closing trial balance on December 31, 2021, is provided below. Blake plans to enter into a partnership with Carmen Santos, effective January 1,
2022. Profits and losses will be shared equally. Blake will transfer all assets and liabilities of his store to the partnership, after revaluation. Santos will invest cash equal to Blake's investment after revaluation. The agreed values are:
Accounts Receivable (net), P7,500; Merchandise Inventory, P27,000; and Store Equipment, P8,000. The partnership will operate under the name Picture Perfect.
BLAKE'S CAMERA SHOP
Post closing Trial Balance
December 31, 2021
ACCOUNT NAME
DEBIT
CREDIT
Cash
P 6,000
Accounts Receivable
8,000
Allowance for Doubtful Accounts
P 200
Merchandise Inventory
26.000
Store Equipment
12,000
Accumulated Depreciation-Store Equipment
8,000
Accounts Payable
5,000
Blake Kredell, Capital
38,800
Totals
P 52,000
P 52,000
In recording the partners' investments:
1. Allowance for Doubtful Accounts will be (1)
credited
(debited or credited?) for (2)
500
(amount)
2. Store Equipment will be (3)
debited
(debited or credited?) for (4)
8000
(amount)
3. Kredell, Capital will be (5) credited
(debited or credited?) for (6)
43500
(amount)
4. Santos, Capital will be (7)
credited
(debited or credited?) for (8)
43500
(amount)
5. Cash balance after recording the partners' investments will be (9)
49500
(amount)
Transcribed Image Text:Net income for Costmore Sales for the year ended December 31, 2021, was P52,000.
The partners, Johnson and Lindstrom, have the following capital balances:
Capital Balance
Johnson
Lindstrom
Original capital contribution
100,000
100,000
As of Dec 31, 2021
122,000
128,000
Average in 2021
110,000
115,000
a. If there was no agreement as to the distribution of profits or losses, how much of the net income will be allocated to Johnson? (1)
26000
To Lindstrom? (2)
26000
b. If partnership profits are distributed according to ending capital balance, how much of the net income will be allocated to Johnson? (3)
25376
To Lindstrom? (4)
26624
C. If partnership profits are distributed according to an arbitrary ratio of 65:35 to Johnson and Lindstrom respectively, how much of the net income will be
allocated to Johnson? (5)
33800
. To Lindstrom? (6)
18200
d. Assume that instead of earning a net income of P52,000, the partnership incurred losses of P30,000. The partnership agreement calls for distribution of
profits at an arbitrary ratio of 65:35 to Johnson and Lindstrom respectively. How much of the net loss will be allocated to Johnson? (7)
(19500)
To Lindstrom? (8) (10500)
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