PROBLEM 1 On June 30, 20x8 A, the sole proprietor of A Inc, expands the company and establishes a partnership with B and C. The partners plan to share profits and losses as follows: A, 50%; B, 25% and C 25%. They also agree that the beginning capital balances of partnership will reflect this same relationship. A asked B to join the partnership because his many business contacts are expected to be valuable during the expansion. B is contributing P40,000 and a building that has an original cost of P520,000, book value of P420,000, tax assessment of P310,000 and fair value of P370,000. The building is subject to a P242,000 mortgage that the partnership will assume. C is contributing P66,000 and marketable securities costing P252,000 but are currently worth P345,000. A's investment in the partnership is his business. He plans to pay off the notes with his personal assets. The other partners have agreed that the partnership will assume the accounts payable. The balance sheet for the A Inc follows: Assets Liabilities and Capital Cash P60,000 Accounts receivable (net) 288,000 Inventory 432,000 Equipment-net (dept’n, P120k) 420,000 Accounts payable P318,000 Notes payable 372,000 PAANO, Capital 510,000 The partners agree that the inventory is worth P510,000, and the equipment is worth half its original cost, and the allowance established for doubtful accounts is correct. How much is the agreed capital of A if the partners agree to use the bonus method to record the formation and if the partners agree to use the goodwill approach to record the formation?
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.
PROBLEM 1
On June 30, 20x8 A, the sole proprietor of A Inc, expands
the company and establishes a partnership with B and C. The
partners plan to share
B, 25% and C 25%. They also agree that the beginning capital
balances of partnership will reflect this same relationship.
A asked B to join the partnership because his many business
contacts are expected to be valuable during the expansion. B is
contributing P40,000 and a building that has an original cost of
P520,000, book value of P420,000, tax assessment of P310,000 and
fair value of P370,000. The building is subject to a P242,000
mortgage that the partnership will assume. C is contributing
P66,000 and marketable securities costing P252,000 but are
currently worth P345,000.
A's investment in the partnership is his business. He plans
to pay off the notes with his personal assets. The other partners
have agreed that the partnership will assume the accounts payable.
The
| Assets | Liabilities and Capital |
| Cash P60,000 Inventory 432,000 Equipment-net (dept’n, P120k) 420,000 |
Accounts payable P318,000 Notes payable 372,000 PAANO, Capital 510,000 |
The partners agree that the inventory is worth P510,000, and the
equipment is worth half its original cost, and the allowance
established for doubtful accounts is correct.
How much is the agreed capital of A if the partners agree to
use the bonus method to record the formation and if the partners
agree to use the
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