Answered: 8. Bruce and Rachel agree to form a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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8. Bruce and Rachel agree to form a partnership on July 1. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce's assets and liabilities are given below.

(see attached image, please answer it based on your knowledge, thank you!)

(NOTE: you already answered the first 3: a-c, so please answer it again for letters d to e. Thank you again!!)

Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership.

The partners have agreed on the following:

a) capital accounts will remain fixed;

b) 12% interest profit computed on capital;

c) salaries of P30,000 each for 2019 but will be twice this amount next year and thereafter;

d)10% interest charge on partners' drawings made beyond the agreed salaries; and

e) remaining profits are to be shared equally.

Direction:

d. Set up the general ledger (T Accounts) accounts to show each partner's equity.

e. Prepare a statement of changes in partners equitv.

8. Bruce and Rachel agree to form a partnership on July 1. Bruce, who has been trading as a
sole proprietor, will invest certain business assets at agreed valuations, transfer his
business liabilities and contribute sufficient cash to bring his total contribution to a 60%
interest over the new business. Details of Bruce's assets and liabilities are given below.
Agreed value
P 30,000
138,000
240,000
200,000
14,000
Book value
P32,000
Accounts Receivable
Inventory
Equipment
Accounts Payable
Notes Payable
240,000
322,000
200,000
14,000
Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a
40% interest in the partnership.
The partners have agreed on the following:
a) capital accounts will remain fixed;
b) 12% interest profit computed on capital;
c) salaries of P30,000 each for 2019 but will be twice this amount next year and thereafter;
d) 10% interest charge on partners' drawings made beyond the agreed salaries; and
e) remaining profits are to be shared equally.
AD
Direction:
a. Prepare two journal entries to set up the partnership.
D. Prepare a statement of financial position for the partnership as at July 1 just after formation.
C. Profit (before interest and salaries) on Dec. 31 was P120,500. Cash withdrawals
made by Bruce and Rachel amounted to P30,000 and P40,000, respectively. Prepare
a profit distribution table and one entry to record the distribution.
the
d. Set
up
general ledger (T Accounts) accounts to show each partner's equity.
Prepare a statement of changes in partners' eauitv.

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