A 4 allowance for doubtful accounts is to be

A 4% allowance for doubtful accounts is to be recognized on the
remaining accounts receivable after write off.
2. Merchandise inventory's present market value is P70,800.
3. Furniture and Fixtures' account should be adjusted to replacement value of P45,000. After adjustment to
replacement value, the asset should be considered as 50% depreciated.
Kulani's business:
1. Only 10% allowance for doubtful accounts is to be recognized on the outstanding
accounts receivable as of June 30, 2014.
2. The office equipment should be depreciated further by 8%.
3. The fair market value of the merchandise is P46,450.
Required : Buni and Kulani agreed to use a new set of books for their partnership.
1. Record the capital adjusting entries in both books.
2. Prepare the adjusted Trial Balance in both books.
3. Close Buni's and Kulani's books.
4. Record the investments of both partners in the new books.
5. Prepare the starting balance sheet of the "Bukul Trading".
Solution: In Buni’s Book
Requirement No. 1 Record the capital adjusting entries
June 30 1] Allowance for doubtful accounts 3,000
Accounts Receivable 3,000
Write off of bad debt accounts.
2] Buni, Capital 1,680
Allowance for doubtful accounts 1,680
Set up 4% allowance for doubtful account.

Partnership and Corporation – Illustrative Approach
28
After the adjustment in no. 1, the balance of allowance for doubtful account is credit balance P600 and the
Accounts Receivable balance is P 57,000. Four percent (4%) of Accounts Receivable is P2,280.
Therefore:
Should be allowance for doubtful account P 2,280
After write off, the balance of allowance for
doubtful account is 600
Adjustment ( additional) P 1,680
3] Merchandise Inventory 6,600
Buni, Capital 6,600
Revaluation of merchandise inventory from P64,200 to P70,800.
4] Furniture and Fixtures 9,000
Buni, Capital 9,000
Revaluation of furniture and fixtures from P36,000 to P45,000.
5] Buni, Capital 5,700
Accumulated depreciation - Fur. & Fixt. 5,700
To adjust accumulated depreciation to 50% of the agreed value.
Agreed value of furniture and fixtures is P45,000 x 50% = P 22,500
Per balance sheet the accumulated depreciation is 16,800
Adjustment P 5,700
Requirement Number 2
The Adjusted Trial Balance Trial Balance__ __Adjustments_ __Adj. T-Balance__
Debit Credit Debit Credit Debit Credit
Cash 48,600 48,600
Accounts Receivable 60,000 3,000 57,000
Allowance for doubtful accounts 3,600 1,320 2,280
Merchandise Inventory 64,200 6,600 70,800
Supplies Inventory 4,800 4,800
Furniture and Fixtures 36,000 9,000 45,000
Accumulated Depreciation 16,800 5,700 22,500
Accounts Payable 24,000 24,000
Notes Payable 48,000 48,000
Buni, Capital, _______ 121,200 ______ 8,220* 129,420
P213,600 213,600 16,920 16,920 P226,200 P226,200
_______ BUNI, CAPITAL______
P 1,680 : P 6,600
5,700 : 9,000
P 8,220 balance*
Requirement Number 3
Closing Entries Debit Credit
Allowance for doubtful account 2,280
Accumulated Depreciation 22,500
Accounts Payable 24,000
Notes Payable 48,000
Buni, Capital, 129,420
Cash 48,600
Accounts Receivable 57,000
Merchandise Inventory 70,800
Supplies Inventory 4,800
Furniture and Fixtures 45,000
To close the books of Buni.

Partnership and Corporation – Illustrative Approach
29
In Kulani’s Books
Requirement Number 1 - Record the capital adjusting entries
1] Allowance for doubtful accounts 300
Kulani, Capital 300
To reduce the allowance for doubtful account from P2,700 to P 2,400.