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 Cash Accounts Receivable Allowance for bad debts Notes Receivable Inventories Prepaid Rent Store Supplies Furniture and Fixture (F & F) Office Equipment (O.E) Store equipment (S.E) Accumulated Depreciation - F & F Accumulated Depreciation - O.E Accumulated Depreciation - S.E Other assets Accounts payable Notes Payable P12,000 50,000 5,000 20,000 120,000 30,000 36,000 85,000 2,500 5,500 15,000 35,000 ASA P26,000 58,000 8,000 100,000 9,000 65,000 55,000 7,500 5,500 10,000 13,000 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 so must be recognized accordingly. 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. The partnership shall be named as UMA-ASA-PA RIN Trading and will use new sets of books.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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a) how much should be the cash investment of PA RIN upon formation of the partnership? b) 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
8,000
Allowance for bad debts
5,000
Notes Receivable
20,000
120,000
30,000
Inventories
100,000
Prepaid Rent
9,000
Store Supplies
Furniture and Fixture (F & F)
Office Equipment (O.E)
36,000
65,000
55,000
85,000
Store equipment (S.E)
Accumulated Depreciation - F & F
Accumulated Depreciation – 0.E
2,500
5,500
7,500
Accumulated Depreciation – S.E
Other assets
5,500
10,000
Accounts payable
15,000
13,000
Notes Payable
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 so must be recognized accordingly.
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.
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 8,000 Allowance for bad debts 5,000 Notes Receivable 20,000 120,000 30,000 Inventories 100,000 Prepaid Rent 9,000 Store Supplies Furniture and Fixture (F & F) Office Equipment (O.E) 36,000 65,000 55,000 85,000 Store equipment (S.E) Accumulated Depreciation - F & F Accumulated Depreciation – 0.E 2,500 5,500 7,500 Accumulated Depreciation – S.E Other assets 5,500 10,000 Accounts payable 15,000 13,000 Notes Payable 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 so must be recognized accordingly. 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. The partnership shall be named as UMA-ASA-PA RIN Trading and will use new sets of books.
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