Answered: • Required: 1. Prepare the entries to…

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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Question

On September 13, 2016, AA and BB decided to combine their assets and form a partnership. The partnership is to take over the business assets and assume the business liabilities; and capitals are to be based on net assets and transferred after the following adjustments.

1. BB's inventory is to be valued at P140,000.

2. A 5% allowance for uncollectible accounts is to be established on the accounts receivable of each party.

3. Accrued liabilities of P8,000 are to be recognized in AA's books.

The statements of financial position on September 13 before adjustments are given below.

AA
BB
Cash
P75,000
P45,000
Accounts Receivable
180,000
150,000
Inventory
160,000
120,000
Property and Equipment
100,000
120,000
Accumulated Depreciation
(45.000)
(15,000)
470,900
420,000
Accounts Payable
138,000
100,000
Capital
332.000
320.000
479,000
420,000

Required:
1. Prepare the entries to adjust and close books of AA and BB.
2. Prepare the opening entries in the books of the partnership.
3. Prepare the statement of financial position as at September
13, 2016.

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