On July 1, 2020, Wency and William agreed to form a partnership from their respective proprietorship businesses and to share profits equally. Wency and William’s balance sheet before the formation were: Wency William Cash P 6,000 P 15,000 Accounts receivable 36,000 21,000 Merchandise inventory 99,000 126,000 Prepaid rent 12,000 Store equipment 120,000 90,000 Accum. Depreciation ( 45,000) ( 54,000) Building 375,000 Accum. Depreciation (75,000) Land 180,000 - Totals P 696,000 P 210,000 Accounts payable P 22,500 P 9,000 Mortgage payable 180,000 - Capital 493,500 201,000 Totals P 696,000 P 210,000 The fair values of Wency’s and William’s assets were: Wency William Merchandise inventory P 81,000 P 135,000 Prepaid rent - 0 Store equipment 45,000 19,500 Building 750,000 - Land 300,000 - How much capital will be credited to Wency?
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.
On July 1, 2020, Wency and William agreed to form a
|
|
Wency |
William |
|
Cash |
P 6,000 |
P 15,000 |
|
|
36,000 |
21,000 |
|
Merchandise inventory |
99,000 |
126,000 |
|
Prepaid rent |
|
12,000 |
|
Store equipment |
120,000 |
90,000 |
|
Accum. Depreciation |
( 45,000) |
( 54,000) |
|
Building |
375,000 |
|
|
Accum. Depreciation |
(75,000) |
|
|
Land |
180,000 |
- |
|
Totals |
P 696,000 |
P 210,000 |
|
Accounts payable |
P 22,500 |
P 9,000 |
|
Mortgage payable |
180,000 |
- |
|
Capital |
493,500 |
201,000 |
|
Totals |
P 696,000 |
P 210,000 |
The fair values of Wency’s and William’s assets were:
|
|
Wency |
William |
|
Merchandise inventory |
P 81,000 |
P 135,000 |
|
Prepaid rent |
- |
0 |
|
Store equipment |
45,000 |
19,500 |
|
Building |
750,000 |
- |
|
Land |
300,000 |
- |
How much capital will be credited to Wency?
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