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UMA, owner of UMA General Merchandising, and ASA, sole proprietor of ASA Trading, decided to combine their businesses on February 15, 2021 in order to cope up with the worsening business and economic conditions. As of that date, the post-closing normal account balances of their businesses are as follows:

UMA, owner of UMA General Merchandising, and ASA, sole proprietor of ASA Trading, decided to combine their businesses on February 15, 2021 in order to cope up with the worsening business and economic conditions. As of that date, the post-closing normal account balances of their businesses are as follows:

FINANCIAL ACCOUNTING
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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 *how much should be the cash investment of PA RIN upon formation of the partnership?

*how much is the total assets of the partnership on Feb. 15, 2021?

UMA, owner of UMA General Merchandising, and ASA, sole proprietor of ASA Trading, decided to combine their businesses on February 15, 2021 in order to cope up with the worsening business and economic conditions. As of that date, the post-closing normal account balances of their businesses are as follows: UMA ASA Cash P12,000 P26,000 Accounts Receivable 50,000 58,000 Allowance for bad debts 5,000 8,000 Notes Receivable 20,000 Inventories 120,000 100,000 Prepaid Rent Store Supplies 30,000 9,000 Furniture and Fixture (F & F) 36,000 Office Equipment (O.E) 85,000 65,000 Store equipment (S.E) Accumulated Depreciation - F & F Accumulated Depreciation – 0.E 55,000 2,500 5,500 7,500 5,500 10,000 Accumulated Depreciation – S.E Other assets Accounts payable Notes Payable 15,000 13,000 35,000 30,000 UMA and ASA had the following agreement on the valuation of net assets contributed to the partnership: a. Uncollectible accounts should be established at 20% of outstanding accounts receivable. b. Notes receivable is a 1 month 12% note dated January 31, 2021. Unrecorded interest on the note shall be recognized accordingly. c. Inventories must be valued at 90% of their book values. d. Prepaid rent represents 3 months' advance payment for office space occupied by UMA which will end March 31, 2021. e. Physical count on February 15, 2021 reveals that only one third of the store supplies remains on hand. f. All fixed assets are to be 25% depreciated. g. Other assets are worthless and must be written off. h. Notes payable of UMA is a 10% note dated January 15, 2021 while that of ASA is a five month 8% note due on May 15, 2021. Interests on notes payable are not yet recorded and i. UMA must withdraw cash or invest additional cash to make his capital balance equal to ASA. j. Mr. PA RIN will also be admitted to the partnership by contributing sufficient cash to have one third interests in the partnership. must be recognized accordingly. The partnership shall be named as UMA-ASA-PA RIN Trading and will use new sets of books.
Transcribed Image Text:UMA, owner of UMA General Merchandising, and ASA, sole proprietor of ASA Trading, decided to combine their businesses on February 15, 2021 in order to cope up with the worsening business and economic conditions. As of that date, the post-closing normal account balances of their businesses are as follows: UMA ASA Cash P12,000 P26,000 Accounts Receivable 50,000 58,000 Allowance for bad debts 5,000 8,000 Notes Receivable 20,000 Inventories 120,000 100,000 Prepaid Rent Store Supplies 30,000 9,000 Furniture and Fixture (F & F) 36,000 Office Equipment (O.E) 85,000 65,000 Store equipment (S.E) Accumulated Depreciation - F & F Accumulated Depreciation – 0.E 55,000 2,500 5,500 7,500 5,500 10,000 Accumulated Depreciation – S.E Other assets Accounts payable Notes Payable 15,000 13,000 35,000 30,000 UMA and ASA had the following agreement on the valuation of net assets contributed to the partnership: a. Uncollectible accounts should be established at 20% of outstanding accounts receivable. b. Notes receivable is a 1 month 12% note dated January 31, 2021. Unrecorded interest on the note shall be recognized accordingly. c. Inventories must be valued at 90% of their book values. d. Prepaid rent represents 3 months' advance payment for office space occupied by UMA which will end March 31, 2021. e. Physical count on February 15, 2021 reveals that only one third of the store supplies remains on hand. f. All fixed assets are to be 25% depreciated. g. Other assets are worthless and must be written off. h. Notes payable of UMA is a 10% note dated January 15, 2021 while that of ASA is a five month 8% note due on May 15, 2021. Interests on notes payable are not yet recorded and i. UMA must withdraw cash or invest additional cash to make his capital balance equal to ASA. j. Mr. PA RIN will also be admitted to the partnership by contributing sufficient cash to have one third interests in the partnership. must be recognized accordingly. The partnership shall be named as UMA-ASA-PA RIN Trading and will use new sets of books.
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