Partnership Formation

P1
On May 1, 2019, the business assets and liabilities of Abeng and Bebang were as follows:
Abeng Bebang
Cash 8,000 62,000
Receivables 200,000 600,000
Inventories 120,000 200,000
Land, Building and Equipment 650,000 535,000
Other Assets 2,000 3,000
Accounts Payable 180,000 250,000
Abeng and Bebang agreed to form a partnership by contributing their net assets, subject to the following adjustment:
 Receivables of 20,000 in Abeng’s books and 40,000 in Bebang’s books are uncollectible.
 Inventories of 6,000 and 7,000 in the respective books of Abeng and Bebang are worthless.
 Other assets in both books are written off.
Upon the partnership’s formation:
The respective capital of partners Abeng and Bebang would be
The total assets of the partnership would be

P2
James admits Curry as a partner in business. Accounts in the ledger of James on June 1, 2019, just before the admission of Curry, show the
following balances:
Cash 26,000 Accounts Payable 264,000
Accounts Receivable 120,000 James, Capital 62,000
Merchandise Inventory 180,000
It is agreed that for purposes of establishing James’s interest, the following adjustment should be made:
a. An allowance for doubtful accounts of 2% of accounts receivable is to be established
b. The merchandise inventory is to be valued at 202,000.
c. Prepaid expenses of 6,500 and accrued expenses of 4,000 are to be established
Curry is to invest sufficient funds in order to receive a 1/3 interest in the partnership.
How much is the adjusted capital of James?
How much cash should Curry invest?
How much is the total assets of the partnership?
Journal entries in the books of the new partnership.

P3
The balance sheet as of July 31, 2018, for the business owned by Toyota, shows the following assets and liabilities:
Cash 100,000 Fixtures 328,000
Accounts Receivable 268,000 Accounts Payable 57,600
Merchandise 440,000
It is estimated that 5% of the receivables will prove uncollectible. The cash balance includes 1,000 share certificates of PNB at its cost, 8,000; the
stock last sold on the market at 70 per share. Merchandise includes obsolete items costing 36,000 that will probably realize only 8,000.
Depreciation has never been recorded; the fixtures are 2 years old, have an estimated life 10 years, and would cost 480,000 if purchased new
currently. Prepaid items amount to 10,000. Ford is to be admitted as a partner upon investing 400,000 cash and 200,000 merchandise.
What will be the total capital after the formation of the partnership?

P4
X and Y are partners sharing profits 60:40. A balance sheet prepared for the partnership on April 1, 2019 shows the following:
Cash 48,000 Accumulated Depreciation 45,000
Accounts Receivable 92,000 Accounts Payable 89,000
Inventory 165,000 X, Capital 133,000
Equipment 70,000 Y, Capital 108,000
On this date, the partners agree to admit Z as a partner. The terms of the agreement is that assets and liabilities are to be restated as follows:
a. An allowance for possible uncollectible of 4,500 is to be established.
b. Inventories are to be restated at their present replacement values of 170,000.
c. Equipment are to be restated at a value of 35,000.
d. Accrued expenses of 4,000 are to be recognized.
X, Y, and Z will divide profits in the ratio of 5:3:2. Capital balances for the new partners are to be in this ratio with X and Y making cash settlement
outside of the partnership for the required capital adjustment between themselves and Z investing cash in the partnership for his interest.
How much cash Z should contribute?
How much will you state the settlement between X and Y?
Journal entries to effect the above transaction?

P5
Marcos and Aquino establish a partnership to operate a used-furniture business under the name of M & A Furniture. Marcos contributes furniture
that cost 60,000 and has a fair value of 90,000. Aquino contributes 30,000 cash and delivery equipment that cost 40,000 and has a fair value of
30,000. The partners agree to share profits and losses 60% to Marcos and 40% to Aquino.
Calculate the peso amount of inequity that will result if the initial noncash contributions of the partners are recorded at cost rather than fair
market value.
P6
The balance sheet of the proprietorship of Pablo as of June 30, 2019 showed the following assets and liabilities:
Cash 40,000 Equipment 65,600
Accounts Receivable 53,600 Accounts Payable 63,520
Inventory 88,000
The cash balance included a 200 share certificate of BW Resources common at acquisition cost of 1,600; the current market quotation is 70 per
share. Of the accounts receivable, an estimated 5% is considered to be doubtful of collection. Certain inventory items, booked at a cost of 22,960,
are currently worth 16,000. Depreciation has not been recorded; the equipment, acquired 2 years ago, has a remaining useful life about 8 more
years. Prepaid expense of 12,800 and accrued expense of 6,120 have not been properly recognized. Marta and Juan will join Pablo in the
partnership. Pablo will invest the net assets of his business, after effecting the appropriate adjustments, and he will be allowed credit for goodwill
equal to 10% of his initial capital credit. Marta and Juan will each contribute cash to secure the respective interests of 1/3 and 1/6, respectively.
a. Pablo’s goodwill credit would be:
b. Marta cash investment would be:
c. Total capital would be:
d. Total assets would be:

P7
S and B formed a partnership. The following are their contributions:
S B
Cash 800,000
Accounts Receivable 400,000
Inventory 640,000
Land 400,000
Building _________ __960,000
Total 1,840,000 1,360,000
Note Payable 480,000
S, Capital 1,360,000
B, Capital _________ _1,360,000
Total 1,840,000 1,360,000
Additional Information:
 Included in accounts receivable is an account amounting to 60,000 which is deemed uncollectible.
 An unpaid mortgage of 80,000 on the land is assumed by the partnership.
 The building is under depreciated by 200,000.
 The building is also has unpaid mortgage amounting to 150,000, but the mortgage is not assumed by the partnership. B agreed to settle
the mortgage using his personal funds.
 The note payable is stated at face amount. A proper valuation requires the recognition of 120,000 discount on notes payable.
 S and B shall share profit and losses 60% and 40%, respectively.
If the partners agree that their capital balances be proportionate to their respective P&L ratios, how much is to be invested by S if B’s capital is the
basis?

P8
The balance sheet of the proprietorship of Clay as of June 30, 2019 showed the following assets and liabilities:
Cash 48,000 Equipment 78,720
Accounts Receivable 64,320 Accounts Payable 76,224
Inventory 105,600
The cash balance included a 200 share certificate of BW Resources common at acquisition cost of 1,600; the current market quotation is 70 per
share. Of the accounts receivable, an estimated 5% is considered to be doubtful of collection. Certain inventory items, booked at a cost of 22,960,
are currently worth 16,000. Depreciation has not been recorded; the equipment, acquired 2 years ago, has a remaining useful life about 8 more
years. Prepaid expense of 12,800 and accrued expense of 6,120 have not been properly recognized. Steph and Draymond will join Clay in the
partnership. Clay will invest the net assets of his business, after effecting the appropriate adjustments, and he will be allowed credit for goodwill
equal to 10% of his initial capital credit. Marta and Juan will each contribute cash to secure the respective interests of 1/3 and 1/6, respectively.
Determine the following:
Goodwill credit to be given to Clay.
The cash investment of Steph.