Ahne, a sole proprietor owns a daycare center named Azsh™. Her business operation was rapidly expanding but her capacity to support the operation needs and to manage the business was limited. She decided to ask her friend Johnny, to help him in the business. They agreed to be partners in the business, and consequently, the business needs to be converted into a partnership. The data of Azsh™ before the partnership formation were as follows: Cash 80,000.00 Accounts Receivable 50,000.00 Supplies 15,000.00 Land 100,000.00 Building 250,000.00 Accumulated Deprecation (50,000.00) 200,000.00 Furniture and Fixtures 100,000.00 Accumulated Depreciation (20,000.00) 80,000.00 Total Assets 525,000.00 Accounts Payable 25,000.00 Mortgage Payable 120,000.00 Ahne, Capital 380,000.00 Total Liabilities and Owner's Equity 525,000.00 Additional Information: Accounts Receivable is 90% realizable. Land has a fair value of 150% of its book value. Building is undervalued by P 30,000. All other assets are fairly valued. Additional liabilities of P 20,000 should be recognized by Ahne. Johnny will invest cash equivalent to 40% of the net assets of the partnership. Assuming Johnny will invest cash for a 60% share in the partnership, how much cash should he invest? A. P 682,500 B. P 607,500 C. P 532,500 D. P 652,500

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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Ahne, a sole proprietor owns a daycare center named Azsh™. Her business operation was rapidly expanding but her capacity to support the operation needs and to manage the business was limited. She decided to ask her friend Johnny, to help him in the business. They agreed to be partners in the business, and consequently, the business needs to be converted into a partnership. The data of Azsh™ before the partnership formation were as follows:

Cash		80,000.00
Accounts Receivable		50,000.00
Supplies		15,000.00
Land		100,000.00
Building	250,000.00
Accumulated Deprecation	(50,000.00)	200,000.00
Furniture and Fixtures	100,000.00
Accumulated Depreciation	(20,000.00)	80,000.00
Total Assets		525,000.00
Accounts Payable		25,000.00
Mortgage Payable		120,000.00
Ahne, Capital		380,000.00
Total Liabilities and Owner's Equity	525,000.00

Additional Information:

Accounts Receivable is 90% realizable.
Land has a fair value of 150% of its book value.
Building is undervalued by P 30,000.
All other assets are fairly valued.
Additional liabilities of P 20,000 should be recognized by Ahne.
Johnny will invest cash equivalent to 40% of the net assets of the partnership.

Assuming Johnny will invest cash for a 60% share in the partnership, how much cash should he invest?

A. P 682,500

B. P 607,500

C. P 532,500

D. P 652,500

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