A1-Partnership-Formation.docx

A1-Partnership-Formation.docx

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Advanced Accounting Part 1 Quiz Problem 1 = James admits Love for partnership interest in his business. The balance sheet accounts of James on November 30, 2015 prior to the admission of Love are as follows: Cash ? Accounts receivable 96,000 Merchandise inventory 152,000 Accounts payable 49,600 James, Capital ? It is agreed that for purposes of establishing James’s interest, the following adjustments should be made: An allowance for doubtful accounts 2% of accounts receivable is to be established. The merchandise inventory is to be valued at P160,000. Prepaid Expenses of P7,200 and accrued expenses of P3,200 are to be recognized. Love invested cash of P113,640 to give him a one- third interest in the total capital of the firm. 1. What is the capital balance of James before adjustment? 2. What is the total partnership asset after admission? Problem 2 = On June 1, 2012, James, Wade and Bosh decided to pool their assets and form Heat Partnership. After formation the partners will participate in the profits and loss ratio of 40%, 25% and 35% for James, Wade and Bosh, respectively. The balance sheets on June 1 before the adjustments were as follows: James Wade Bosh Cash 42,000 8,000 14,000 Accounts receivable 250,000 325,00 0 300,00 0 Allowance for doubtful accounts -18,000 -24,000 -5,000 Notes receivable 120,00 0 Merchandise inventory 75,000 110,00 0 60,000 Prepaid rent 0 36,000 20,000 Building 400,000 Accumulated depreciation -60,000 Equipment 276,00 0 Accumulated depreciation -36,800 Total Assets 689,00 0 694,20 0 509,00 0
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