partners Required: 1. Prepare journal entries to record the formation of the partnership on January 1, 2021, and to record the events that occurred in 2021. 2. Prepare the statement of comprehensive income for the partnership for the year ended December 31, 2021. 3. Prepare the statement of financial position for the partnership as of December 31, 2021
partners Required: 1. Prepare journal entries to record the formation of the partnership on January 1, 2021, and to record the events that occurred in 2021. 2. Prepare the statement of comprehensive income for the partnership for the year ended December 31, 2021. 3. Prepare the statement of financial position for the partnership as of December 31, 2021
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.
Question
Transcribed Image Text:ASSESSMENT ACTIVITIES: PARTNERSHIP ACCOUNTING
Activity 3: The partnership of Kobe and Lebron began business on January 2, 2021. Each
partner confributed the following assets (the noncash assets are stated at their fair values
on January 1, 2021:
Cash
Inventory
Land
Kobe
P 600,000
800,000
-0-
1.000,000
Lebron
P 500,000
LOUIS
Equipment
1,300,000
-0-
The land was subject to a P500,000 mortgage, which the partnership assumed on January
1, 2021. The equipment was subject to an installment notes payable that had an unpaid
principal amount of P200,000 on January 1, 2021. The partnership also assumed this notes
payable. Kobe and Lebron agreed to share partnership income and losses in the following
manner:
Interest on beginning capital balances
Salaries
Remainder
Jenny
3%
120,000
Kenny
3%
120,000
60%
40%
During 2021, the following events occurred:
1. Inventory was acquired at a cost P300,000. At December 31, 2021, the partnership
owed P60,000 to its suppliers.
2. Principal of P50,000 was paid on the mortgage. Interest expense incurred on the
mortgage was P20.000, all of which was paid by December 31, 2021.
3. Principal of P35,000was on the installment note. Interest expenses incurred on the
installment note was P20,000, all of which was paid by December 31, 2021.
4. Sales on account amounted to P1,550,000. At December 31, 2021, customers owed the
partnership P210,000.
5. Selling and general expenses, excluding depreciation, amounted to P340,000. At
December 31, 2021, the partnership owned P62,000 of accrued expenses. Depreciation
expenses was P60,000.
6. Each partner withdrew P2,000 each week in anticipation of partnership profits.
7. The partnership's inventory at December 31, 2021, was P200,000.
8. The partners allocated the net income for 2021 and closed the accounts.
Required:
1. Prepare journal entries to record the formation of the partnership on January 1, 2021,
and to record the events that occurred in 2021.
2. Prepare the statement of comprehensive income for the partnership for the year
ended December 31, 2021.
3. Prepare the statement of financial position for the partnership as of December 31, 2021
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