Advanced Accounting Part 1

Quiz

Advanced Accounting Part 1

Quiz

Lebron and James each operating a separate business

agreed to join in partnership as of July 1, 2013. The
balance sheet data presented by each as of this date
were as follows:
Cash
Accounts receivable
Merchandise inventory
Office equipment
Total

Lebron
32,000
320,000
400,000
100,000
852,000

James
120,000
240,000
360,000
120,000
840,000

Accounts Payable
Notes Payable
Capital
Total

100,000
20,000
732,000
852,000

160,000
680,000
840,000

The assets of the two partners were carefully examined

and it was agreed that certain adjustments be made
and the above balance sheets as adjusted be the basis
on which the partnership begins operations.
The adjustments agreed upon are as follows:
a.
Lebrons accounts receivable are to be taken
over at a book value less 15% and Jamess
accounts receivable at book value less 10%.
b.
Lebrons office equipment is new and is
considered adequate for the new business;
therefore, it is decided that James dispose of his
equipment at the highest cash price possible and
that Lebron bear one-third of the loss resulting
from the sale. Jamess office equipment is
disposed of at book value less 20%.
c.
Lebron pays off the note with his personal
assets. Total payment made was P21,200 plus
interest.
Requirements
Case 1: Partners agreed capital interest were Lebron
60% and James 40%.
1. What are the partners capital balances under
bonus method.
2. What are the partners capital balances under
goodwill method.
Case 2: = James will invest sufficient cash to give him
50% interest in the business. Determine the following:
3. Net adjustments on their capital.
4. James additional cash investment.
5. Total partnership capital
6. Total partnership assets
Case 3: = Goodwill of P39,000 is to be allowed to
Lebron and James is allowed to withdraw cash to give
him 30% interest in the business. Determine the
following:
7. Net adjustments on their capital
8. Partners capital balances after formation
9. Total partnership liabilities
10. Total partnership assets

Lebron and James each operating a separate business

agreed to join in partnership as of July 1, 2013. The
balance sheet data presented by each as of this date
were as follows:
Cash
Accounts receivable
Merchandise inventory
Office equipment
Total
Accounts Payable
Notes Payable
Capital
Total

Lebron
32,000
320,000
400,000
100,000
852,000

James
120,000
240,000
360,000
120,000
840,000

100,000
20,000
732,000
852,000

160,000
680,000
840,000

The assets of the two partners were carefully examined

and it was agreed that certain adjustments be made
and the above balance sheets as adjusted be the basis
on which the partnership begins operations.
The adjustments agreed upon are as follows:
d.
Lebrons accounts receivable are to be taken
over at a book value less 15% and Jamess
accounts receivable at book value less 10%.
e.
Lebrons office equipment is new and is
considered adequate for the new business;
therefore, it is decided that James dispose of his
equipment at the highest cash price possible and
that Lebron bear one-third of the loss resulting
from the sale. Jamess office equipment is
disposed of at book value less 20%.
f.
Lebron pays off the note with his personal
assets. Total payment made was P21,200 plus
interest.
Requirements
Case 1: Partners agreed capital interest were Lebron
60% and James 40%.
1.
What are the partners capital balances under
bonus method.
2.
What are the partners capital balances under
goodwill method.
Case 2: = James will invest sufficient cash to give him
50% interest in the business. Determine the following:
3.
Net adjustments on their capital.
4.
James additional cash investment.
5.
Total partnership capital
6.
Total partnership assets
Case 3: = Goodwill of P39,000 is to be allowed to
Lebron and James is allowed to withdraw cash to give
him 30% interest in the business. Determine the
following:
7.
Net adjustments on their capital
8.
Partners capital balances after formation
9.
Total partnership liabilities
10.
Total partnership assets