11. 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 P32,000 2,400 P29,600 Inventory Equipment Less: Accumulated depreciation 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.
11. 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 P32,000 2,400 P29,600 Inventory Equipment Less: Accumulated depreciation 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Question
What is the two investment entries for adjustment and agreed capital using 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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education