On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partner's capitals are to be based on net assets transferred after the following adjustments. Profit & loss are allocated equally. BB's inventory is to be increased by P4,000, an allowance for doubtful account of P1,000 and P1,500 are to be set up in books of AA and BB, respectively; and accounts payable of P4,000 is to be recognized in AA's books. The individual trial balances on August, before adjustments, follow: AA BB 113,000 Assets 75,000 Liabilities 5,000 34,500 What is the capital of AA and BB after the above adjustments? OA. AA (68,750); BB (77,250) OB. AA (75,000); BB (81,000) O C. AA (65,000); BB (76,000) OD. AA (65,000); BB (81,000)

On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partner's capitals are to be based on net assets transferred after the following adjustments. Profit & loss are allocated equally. BB's inventory is to be increased by P4,000, an allowance for doubtful account of P1,000 and P1,500 are to be set up in books of AA and BB, respectively; and accounts payable of P4,000 is to be recognized in AA's books. The individual trial balances on August, before adjustments, follow: AA BB 113,000 Assets 75,000 Liabilities 5,000 34,500 What is the capital of AA and BB after the above adjustments? OA. AA (68,750); BB (77,250) OB. AA (75,000); BB (81,000) O C. AA (65,000); BB (76,000) OD. AA (65,000); BB (81,000)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $23,400 in…

A: Journal Entries:

Q: Ries, Bax, and Thomas invested $54,000, $70,000, and $78,000, respectively, in a partnership. During…

A: First, we need to calculate the total equity by adding the capital balances of the partnersThen,…

Q: On December 31, 2020, the partners of A, B & C LLP, who shared net income and losses in the ratio of…

A: In the partnership liquidation, the net realized assets from the assets is to be paid in preference…

Q: Ries, Bax, and Thomas invested $32,000, $48,000, and $56,000, respectively, in a partnership. During…

A: A partnership is a mutual agreement entered into between two or more entities for the purpose, of…

Q: Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of…

A: Rodgers Capital =$60,000 Winter Capital =$90,000 Rodgers Salary allowance=$25,000 Winter Salary…

Q: McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The…

A: Partnership:Partnership can be defined as the agreement between two or more persons to carry out…

Q: Jenkins, Willis, and Trent invested $208,000, $364,000, and $468,000, respectively, in a…

A: The partnership comes into existence when two or more persons agree to do the business and further…

Q: kins, Willis, and Trent invested $220,000, $385,000, and $495,000, respectively, in a partnership.…

A: A partnership is a type of commercial organization in which two or more people, known as partners,…

Q: UMA, owner of UMA General Merchandising, and ASA, sole proprietor of ASA Trading, decided to combine…

A: A partnership is a commercial arrangement in which two or more people do business together and split…

Q: Hosea, Riziki and Zarika are trading as Horizon enterprises. They share profits and losses in the…

A: It is an agreement between two or more parties to conduct the business and share the profits and…

Q: On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $20,630 in…

A: Financial Position of Partnership: A balance sheet, also known as a statement of financial status,…

Question

On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over
their business assets and assume the liabilities. Partner's capitals are to be based on net
assets transferred after the following adjustments. Profit & loss are allocated equally. BB's
inventory is to be increased by P4,000, an allowance for doubtful account of P1,000 and
P1,500 are to be set up in books of AA and BB, respectively; and accounts payable of
P4,000 is to be recognized in AA's books. The individual trial balances on August, before
adjustments, follow:
AA
BB
Assets
Liabilities
75,000 113,000
5,000
34,500
What is the capital of AA and BB after the above adjustments?
O A. AA (68,750); BB (77,250)
O B. AA (75,000); BB (81,000)
O C. AA (65,000); BB (76,000)
O D. AA (65,000); BB (81,000)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

The balance in Xue's capital account includes an additional investment of $10,000 made on May 5, 20Y2. Instructions: 1. Prepare an income statement for 20Y2, indicating the division of net income. The partnership agreement provides for salary allowances of $38,000 to Ramirez and $46,000 to Xue, allowances of 10% on each partner's capital balance at the beginning of the fiscal year, and equal division of the remaining net income or a net loss. 2. prepare a statement of partnership equity for 20Y2. 3. Prepare a balance sheet as of the end of 20Y2.
On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $23,400 in cash and merchandise inventory valued at $62,600. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow in the image below. The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $19,000 (Keene) and $24,000 (Wallace), and the remainder equally. The journal entries for both Keene and Wallace are also attached below. Prepare a balance sheet as of March 1, 20Y8, the date of formation of the partnership of Keene and Wallace.
Ries, Bax, and Thomas invested $40,000, $56,000, and $64,000, respectively, in a partnership. During its first calendar year, the firm earned $418, 200. Required: Prepare the entry to close the firm's Income Summary account as of its December 31 year-end and to allocate the $418, 200 net income under each of the following separate assumptions. 2. The partners agreed to share income and loss in the ratio of their beginning capital investments.
McGill and Smyth have capital balances on January 1 of $41,000 and $34,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $25,000 for McGill and $17,000 for Smyth, (2) interest at 12% on beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth. (a) (1) Prepare a schedule showing the distribution of net income, assuming net income is $85,000. (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) Salary allowance Interest allowance Total salaries and interest DIVISION OF NET INCOME McGill Smyth $ Total $ Remaining income/ deficiency Total division of net income $ $ $ (2) Prepare a schedule showing the distribution of net income, assuming net income is $23,000. (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) Salary allowance…
On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $23,400 in cash and merchandise inventory valued at $62,600. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow in the image below. The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $19,000 (Keene) and $24,000 (Wallace), and the remainder equally. Instructions Journalize the entries to record the investments of Keene and Wallace in the partnership accounts.
At April 30, partners' capital balances in Crane Company are G. Donley $54,080, C. Lamar $49,920, and J. Pinkston $18,720. The income sharing ratios are 5:4:1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a partner. (a) Journalize the admission of Terrell under each of the following independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275.) (1) (2) (3) (4) No. Account Titles and Explanation 1. 2. 3. Terrell purchases 50% of Pinkston's ownership interest by paying Pinkston $16,640 in cash. Terrell purchases 33¹/3% of Lamar's ownership interest by paying Lamar $15,600 in cash. Terrell invests $64,480 for a 30% ownership interest, and bonuses are given to the old partners. Terrell invests $43,680 for a 30% ownership Interest, which includes a bonus to the new partner. 4. Debit Credit