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  • For Zaikee - Activity 1

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    Nicole Allyson Aguanta
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    X admits Y as a partner and converts the sole proprietorship into a partnership. Several adjustments are made to accounts including recognizing doubtful accounts and depreciation. X contributes their adjusted capital of $48,000 while Y contributes $100,000 in cash for 50% ownership. The partnership has total assets of $231,000 including $152,000 in cash, accounts receivable of $45,000, and equipment of $34,000. Total liabilities are $31,000 and capital contributions from X and Y are $100,000 each.

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    X admits Y as a partner and converts the sole proprietorship into a partnership. Several adjustments are made to accounts including recognizing doubtful accounts and depreciation. X contributes their adjusted capital of $48,000 while Y contributes $100,000 in cash for 50% ownership. The partnership has total assets of $231,000 including $152,000 in cash, accounts receivable of $45,000, and equipment of $34,000. Total liabilities are $31,000 and capital contributions from X and Y are $100,000 each.

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    161 views3 pages

    For Zaikee - Activity 1

    Uploaded by

    Nicole Allyson Aguanta
    X admits Y as a partner and converts the sole proprietorship into a partnership. Several adjustments are made to accounts including recognizing doubtful accounts and depreciation. X contributes their adjusted capital of $48,000 while Y contributes $100,000 in cash for 50% ownership. The partnership has total assets of $231,000 including $152,000 in cash, accounts receivable of $45,000, and equipment of $34,000. Total liabilities are $31,000 and capital contributions from X and Y are $100,000 each.

    Copyright:

    © All Rights Reserved
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    of 3

    ACTIVITY 1

    Partnership Formation: Sole Proprietor and an Individual with No Business

    The following are the accounts at their normal balances of X, a single proprietorship prior to its
    conversion into a partnership:
    Account Receivable P50,000
    Allowance for Doubtful Accounts 1,000
    Equipment 60,000
    Accumulated Depreciation - Equipment 20,000
    Notes Payable 30,000
    X, Capital 59,000

    X admits Y as a partner in the partnership with a total agreed capitalization of P200,000, and Y
    contributes cash that will give him 50% claim in the partnership. X will invest additional cash after the
    proprietorship’s assets and liabilities are adjusted per agreement as follows:
    a. The realizable amount of Accounts Receivable is P45,000.
    b. The Equipment is to be stated at its depreciated value of P34,000.
    c. Accrued interest of P1,000 on the Notes Payable should be recognized.

    Required:
    A. Journalize the adjustments in the book of X.
    a. X, Capital 4,000
    Allowance for Doubtful Accounts 4,000
    (P50,000 – (45,000 – 1,000))
    b. X, Capital 6,000
    Accumulated Depreciation – Equipment 6,000
    (P60,000 – (34,000 – 20,000))
    c. X, Capital 1,000
    Accrued Interest 1,000

    B. Prepare the journal entry to close the single proprietorship’s books after adjustments are
    effected.

    Allowance for Doubtful Accounts (1,000 + 4,000) 5,000


    Accumulated Depreciation – Equipment (20,000 + 6,000) 26,000
    Notes Payable 30,000
    Accrued Interest 1,000
    X, Capital (59,000 – 4,000 – 6,000 – 1,000) 48,000
    Accounts Receivable 50,000
    Equipment 60,000

    C. Prepare the journal entry to record the investment of X in the partnership.

    Total Agreed Capital (TAC) = P200,000


    Allocation: Y = 50%
    X = 100% - 50% = 50% P200,000 x 50% = P100,000
    Additional cash contribution for X in order to have 50% capital interest in the partnership:
    P100,0000 – 48,000 = P52,000

    Cash 52,000
    X, Capital 52,000
    D. Prepare the journal entry to record the investment of Y in the partnership.

    Cash 100,000
    Y, Capital 100,000

    E. Prepare the statement of financial position of the partnership upon formation.

    X and Y Partnership
    Statement of Financial Position
    As of MM/DD/YYYY
    ASSETS
    Cash (100,000 + 52,000) P152,000
    Accounts Receivable 50,000
    Less: Allowance for Doubtful Accounts P5,000 45,000

    Equipment 60,000
    Less: Accumulated Depreciation – Equipment 26,000 34,000
    Total Assets P231,000

    LIABILITIES AND EQUITY


    Liabities
    Notes Payable P30,000
    Accrued Interest 1,000
    Total Liabilities 31,000
    X, Capital 100,000
    Y, Capital 100,000 200,000
    Total Liabilities and Equity P231,000

    F. Compute for the following:


    1. Adjusted capital of X in his sole proprietorship.
    X, Capital – Unadjusted P59,000
    Adjustments:
    Allowance for Doubtful Accounts (4,000)
    Accumulated Depreciation – Equipment (6,000)
    Accrued Interest (1,000)
    X, Capital – Adjusted P48,000

    2. The additional cash that X has to contribute into the partnership.


    Total Agreed Capital (TAC) = P200,000
    Allocation: Y = 50%
    X = 100% - 50% = 50% P200,000 x 50% = P100,000
    Additional cash contribution for X in order to have 50% capital interest in the
    partnership:
    P100,0000 – 48,000 = P52,000

    3. The net assets of the partnership upon formation.


    P152,000 + 45,000 + 34,000 = P231,000 net of depreciation and doubtful accounts

    4. The total liabilities of the partnership upon formation.


    P30,000 notes payable + 1,000 accrued interest = P31,000
    5. Total cash of the partnership upon formation.
    P100,000 from Y + 52,000 from X = P152,000

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