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I just want to clarify the solution provided for our review material: In adjusting the capital accounts, why is under depreciated in the equipment of Francis subtracted and over depreciation added in Rinna?  Does this apply to all problems that deals with over depreciation and under depreciation? Isn't it, add when under depreciated and subtract when over depreciated?

I just want to clarify the solution provided for our review material: In adjusting the capital accounts, why is under depreciated in the equipment of Francis subtracted and over depreciation added in Rinna?  Does this apply to all problems that deals with over depreciation and under depreciation? Isn't it, add when under depreciated and subtract when over depreciated?

FINANCIAL ACCOUNTING
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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Hi I just want to clarify the solution provided for our review material:

In adjusting the capital accounts, why is under depreciated in the equipment of Francis subtracted and over depreciation added in Rinna?  Does this apply to all problems that deals with over depreciation and under depreciation? Isn't it, add when under depreciated and subtract when over depreciated?

For problems 31-33 Francis and Rinna decided to form a partnership during 2020. The following are their statement of financial position on the date of formation Francis Rinna Cash 131,250 328,125 Accounts Receivable 2,975,000 1,793,750 Inventories 1,750,000 1,771,875 Equipment 1,312,500 2,537,500 Total 6,168,750 6,431,250 Accounts Payable 918,750 2,318,750 Francis, Capital 5,250,000 Rinna, Capital 4,112,500 Total 6,168,750 6,431,250 The following are based on their agreement • Equipment of Francis is under-depreciation by P175,000 and the equipment of Rinna is over-depreciated by P262,500 Allowance for doubtful accounts is to be set up amounting to P595,000 for Francis and P393,750 for Rinna Inventories in the amount of P43,750 and P30,625 are worthless in the books of Francis and Rinna, respectively The partnership agreement provides a profit and loss ratio and capital interest ratio of 70% and 30% for Francis and Rinna, respectively Francis will invest or withdraw sufficient amount of cash to be in accordance to their capital interest ratio 31. What is the amount to be credited to Rinna's capital account in the partnership? a) 3,425,625 b) 4,436,250 c) 3,950,620 d) 3,950,625 32. What is the agreed combined partnership capital? a) 11,418,750 b) 14,787,500 c) 13,168,750 d) 5,643,750 33. What is the amount of cash to be additionally invested or withdrawn by Francis in accordance with their agreement? a) P4,781,875 invest b) P3,556,875 invest c) P4,781,875 withdraw d) P3,556,875 withdraw
Transcribed Image Text:For problems 31-33 Francis and Rinna decided to form a partnership during 2020. The following are their statement of financial position on the date of formation Francis Rinna Cash 131,250 328,125 Accounts Receivable 2,975,000 1,793,750 Inventories 1,750,000 1,771,875 Equipment 1,312,500 2,537,500 Total 6,168,750 6,431,250 Accounts Payable 918,750 2,318,750 Francis, Capital 5,250,000 Rinna, Capital 4,112,500 Total 6,168,750 6,431,250 The following are based on their agreement • Equipment of Francis is under-depreciation by P175,000 and the equipment of Rinna is over-depreciated by P262,500 Allowance for doubtful accounts is to be set up amounting to P595,000 for Francis and P393,750 for Rinna Inventories in the amount of P43,750 and P30,625 are worthless in the books of Francis and Rinna, respectively The partnership agreement provides a profit and loss ratio and capital interest ratio of 70% and 30% for Francis and Rinna, respectively Francis will invest or withdraw sufficient amount of cash to be in accordance to their capital interest ratio 31. What is the amount to be credited to Rinna's capital account in the partnership? a) 3,425,625 b) 4,436,250 c) 3,950,620 d) 3,950,625 32. What is the agreed combined partnership capital? a) 11,418,750 b) 14,787,500 c) 13,168,750 d) 5,643,750 33. What is the amount of cash to be additionally invested or withdrawn by Francis in accordance with their agreement? a) P4,781,875 invest b) P3,556,875 invest c) P4,781,875 withdraw d) P3,556,875 withdraw
31- 33) Francis Rinna Capital 5,250, 000 4, I12,500 Equipment CAS, 000) ADA (545,000) CA3.750) 202, SOO (313, 750) (30, U25) 3, 950, U25 (31) Inventory Adjusted Adati Inv. 4,436, 250 4.781, 875 ( 33) Agreta Cap. 9,218, 125 Ttai Partnercnip capital 3,950,625 ÷ 0.3 13,l48,750 (32) * Francis agrecd capital 13, IUP, 730 x70% 9, 218, 25 %3D
Transcribed Image Text:31- 33) Francis Rinna Capital 5,250, 000 4, I12,500 Equipment CAS, 000) ADA (545,000) CA3.750) 202, SOO (313, 750) (30, U25) 3, 950, U25 (31) Inventory Adjusted Adati Inv. 4,436, 250 4.781, 875 ( 33) Agreta Cap. 9,218, 125 Ttai Partnercnip capital 3,950,625 ÷ 0.3 13,l48,750 (32) * Francis agrecd capital 13, IUP, 730 x70% 9, 218, 25 %3D
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