Problem 1 Formation and Operations of a Partnership On June 30, 2021, William and Bryan formed a partnership. The partners agreed to invest equal amounts of capital. William invested his proprietorship's assets and liabilities as follows: Book Value Fair Market Value 720,000 100,500 241,000 117,000 276,000 - 0 - 191,000 Accounts Receivable Php Php Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Office Equipment Accumulated Depreciation Accounts Payable 720,000 -0 - 233,000 117,000 459,000 153,000 191,000 On June 30, 2021, Bryan invested cash, an amount that is equal to current fair market value of William's partnership Capital. William, being the managing partner of the partnership, he will earn two-thirds (2/3) of the partnership profit. Bryan agreed to accept one-third of the profit. During the remainder of the year, the partnership earned Php 450,000. The temporary withdrawals or drawing of William and Bryan were Php 352,000 and Php 230,000 respectively. Requirement: 1. Prepare the journal entries to record the initial investments of William and Bryan in the new set of Books of Accounts of the WB Partnership. 2. Prepare the WB Partnership Balance Sheet immediately after its formation on June 30, 2021. 3. Prepare the profit / loss distribution schedule based on their agreed upon profit and loss ratio. 4. Prepare the journal entries to close the income summary and the drawing accounts of William and Bryan.
Problem 1 Formation and Operations of a Partnership On June 30, 2021, William and Bryan formed a partnership. The partners agreed to invest equal amounts of capital. William invested his proprietorship's assets and liabilities as follows: Book Value Fair Market Value 720,000 100,500 241,000 117,000 276,000 - 0 - 191,000 Accounts Receivable Php Php Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Office Equipment Accumulated Depreciation Accounts Payable 720,000 -0 - 233,000 117,000 459,000 153,000 191,000 On June 30, 2021, Bryan invested cash, an amount that is equal to current fair market value of William's partnership Capital. William, being the managing partner of the partnership, he will earn two-thirds (2/3) of the partnership profit. Bryan agreed to accept one-third of the profit. During the remainder of the year, the partnership earned Php 450,000. The temporary withdrawals or drawing of William and Bryan were Php 352,000 and Php 230,000 respectively. Requirement: 1. Prepare the journal entries to record the initial investments of William and Bryan in the new set of Books of Accounts of the WB Partnership. 2. Prepare the WB Partnership Balance Sheet immediately after its formation on June 30, 2021. 3. Prepare the profit / loss distribution schedule based on their agreed upon profit and loss ratio. 4. Prepare the journal entries to close the income summary and the drawing accounts of William and Bryan.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 1
Formation and Operations of a Partnership
On June 30, 2021, William and Bryan formed a partnership. The partners agreed to invest equal
amounts of capital. William invested his proprietorship's assets and liabilities as follows:
Book Value
Fair Market Value
Accounts Receivable
Php
720,000
- 0 -
233,000
117,000
459,000
153,000
191,000
720,000
100,500
241,000
117,000
276,000
- 0 -
191,000
Php
Allowance for Doubtful Accounts
Merchandise Inventory
Prepaid Expenses
Office Equipment
Accumulated Depreciation
Accounts Payable
On June 30, 2021, Bryan invested cash, an amount that is equal to current fair market value of
William's partnership Capital. William, being the managing partner of the partnership, he will earn
two-thirds (2/3) of the partnership profit. Bryan agreed to accept one-third of the profit.
During the remainder of the year, the partnership earned Php 450,000. The temporary withdrawals or
drawing of William and Bryan were Php 352,000 and Php 230,000 respectively.
Requirement:
Prepare the journal entries to record the initial investments of William and Bryan in the new set
of Books of Accounts of the WB Partnership.
1.
2.
Prepare the WB Partnership Balance Sheet immediately after its formation on June 30, 2021.
3.
Prepare the profit / loss distribution schedule based on their agreed upon profit and loss ratio.
Prepare the journal entries to close the income summary and the drawing accounts of William
and Bryan.
4.
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