The partnership business of John Estrada and Peter Arroyo was formed on January 2, 2020. At that date, the following assets were invested as derived from their respective sole proprietor’s books. Book of Estrada Book of Arroyo Cash………………………………………………..P145,000 160,000 Accounts receivable………………………….. 80,000 50,000 Allowance for doubtful accounts………… (5,000) (3,000) Merchandise inventory…………………….. 200,000 190,000 Partner’s agreement as follows: 1. Estrada and Arroyo’s adjusted capital contributions must be equal. In the event that one’s contribution will exceed the other, any one of them shall withdraw “Cash” from their respective investment. 2. Their respective Accounts receivable should have a probability of collections. 80% for Estrada and 90% for Arroyo. 3. Merchandise inventory will be caried in the partnership book “as is”. 4. Prepaid expense of P20,000 should be recognized for Estrada and P5,000 Accrued expenses for Arroyo. a. How much is the adjusted capital contribution of Estrada? b. How much is the adjusted capital contribution of Arroyo? c. After the formation, the cash balance of Estrada and Arroyo would be
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.
The
following assets were invested as derived from their respective sole proprietor’s books.
Book of Estrada Book of Arroyo
Cash………………………………………………..P145,000 160,000
Allowance for doubtful accounts………… (5,000) (3,000)
Merchandise inventory…………………….. 200,000 190,000
Partner’s agreement as follows:
1. Estrada and Arroyo’s adjusted capital contributions must be equal. In the event that one’s contribution will
exceed the other, any one of them shall withdraw “Cash” from their respective investment.
2. Their respective Accounts receivable should have a probability of collections.
80% for Estrada and 90% for Arroyo.
3. Merchandise inventory will be caried in the partnership book “as is”.
4. Prepaid expense of P20,000 should be recognized for Estrada and P5,000 Accrued expenses for Arroyo.
a. How much is the adjusted capital contribution of Estrada?
b. How much is the adjusted capital contribution of Arroyo?
c. After the formation, the cash balance of Estrada and Arroyo would be
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