EXERCISE 5. Journal Entries and Statement Preparation - Two existing sole proprietorship businesses combine their resources. On May 1, 2022, Mico and Ching, sole proprietors, decided to combine their businesses as a partnership under the name of Ming's Apparels. The new business would take over assets and assume liabilities after the following adjustments: 1. An allowance for doubtful accounts of 2% had to be established on the accounts receivable of each party. 2. Ching's inventory is to be valued at P100,000. 3. Accrued expenses of P13,800 had to be recognized in Mico's books. 4. One-fourth of supplies had been used up. 5. Depreciable assets had to be valued at 80% of original cost. Just prior to partnership formation, the books of Mico and Ching showed the following: Mico Ching Cash P215,000 P145.000 Accounts Receivable 90,000 80,000 Merchandise Inventory 129,000 105,000 Supplies 12,000 8,800 Equipment 50,000 35,000 Accumulated Depreciation - Equipment 13,500 12,800 Accounts Payable 55,000 Notes Payable 102,000 You are required to: 1. Prepare and upload journal entries related to partnership formation, assuming the partnership would use the books of Ching. 2. Prepare and upload journal entries related to partnership formation, assuming the partnership would open new set of books. 3. Prepare and upload statement of financial position just after partnership formation, assuming the partnership would open new set of books.
EXERCISE 5. Journal Entries and Statement Preparation - Two existing sole proprietorship businesses combine their resources. On May 1, 2022, Mico and Ching, sole proprietors, decided to combine their businesses as a partnership under the name of Ming's Apparels. The new business would take over assets and assume liabilities after the following adjustments: 1. An allowance for doubtful accounts of 2% had to be established on the accounts receivable of each party. 2. Ching's inventory is to be valued at P100,000. 3. Accrued expenses of P13,800 had to be recognized in Mico's books. 4. One-fourth of supplies had been used up. 5. Depreciable assets had to be valued at 80% of original cost. Just prior to partnership formation, the books of Mico and Ching showed the following: Mico Ching Cash P215,000 P145.000 Accounts Receivable 90,000 80,000 Merchandise Inventory 129,000 105,000 Supplies 12,000 8,800 Equipment 50,000 35,000 Accumulated Depreciation - Equipment 13,500 12,800 Accounts Payable 55,000 Notes Payable 102,000 You are required to: 1. Prepare and upload journal entries related to partnership formation, assuming the partnership would use the books of Ching. 2. Prepare and upload journal entries related to partnership formation, assuming the partnership would open new set of books. 3. Prepare and upload statement of financial position just after partnership formation, assuming the partnership would open new set of books.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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Transcribed Image Text:EXERCISE 5. Journal Entries and Statement Preparation - Two existing sole proprietorship businesses combine their resources.
On May 1, 2022, Mico and Ching, sole proprietors, decided to combine their businesses as a partnership under the name of Ming's Apparels. The new
business would take over assets and assume liabilities after the following adjustments:
1. An allowance for doubtful accounts of 2% had to be established on the accounts receivable of each party.
2. Ching's inventory is to be valued at $100,000.
3. Accrued expenses of P13,800 had to be recognized in Mico's books.
4. One-fourth of supplies had been used up.
5. Depreciable assets had to be valued at 80% of original cost.
Just prior to partnership formation, the books of Mico and Ching showed the following:
Mico
Ching
Cash
P215,000
P145,000
Accounts Receivable
90,000
80,000
Merchandise Inventory
129,000
105,000
Supplies
12,000
8,800
Equipment
50,000
35,000
Accumulated Depreciation - Equipment
13,500
12,800
Accounts Payable
55,000
Notes Payable
102,000
You are required to:
1. Prepare and upload journal entries related to partnership formation, assuming the partnership would use the books of Ching.
2. Prepare and upload journal entries related to partnership formation, assuming the partnership would open new set of books.
3. Prepare and upload statement of financial position just after partnership formation, assuming the partnership would open new set of books.
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