e and Alex decide to merge their proprie ners. Financial records showed the following:
e and Alex decide to merge their proprie ners. Financial records showed the following:
Chapter21: Partnerships
Section: Chapter Questions
Problem 65P
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Question
What is the cash method
Transcribed Image Text:Маy s
estment.
L Alice and Alex decide to merge their proprietorships into a partnership called AA
Partners. Financial records showed the following:
Alice
Alex
Cash
P25,000
Accounts Receivable
Less: Allowance for impairment
Inventory
Equipment
Less: Accumulated depreciation
P32,000
2,400 P29,600
30,000
40,000
14,000 26,400
The partners agree that the net realizable value of the receivables is P25,000 and that the
fair value of the equipment is P22,000. Obsolete stock of P10,000 should be written off.
Direction:
a) Two investment entries supported by a table for adjusted and agreed capital based on
the following independent situations:
1) Cash Method. Equal interest over the assets with additional investment required to
meet this agreement.
2) Goodwill Method. Alex investment represents 40% of total agreed equity. The
excess capital for Alice is due to her strong connection in the electronic industry
which will ensure a large client base for the partnership.
3) Bonus Method. Equal interest over the partnership with no additional adjustment
on the assets. Make a third entry for the bonus capital.
4) Revaluation Method. Alex investment represents 50% of total agreed equity.
Total agreed capitalization is lesser than total actual contributions. They agreed that
the investment in equipment should further be reduced.
b) Present the statement of financial position under each of the above situations.
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