Problem #6

A Sole Proprietorship and an Individual with No Business Form a Partnership

On Apr 8, 2018, Tolentino who has her own retail business and Tan, decided to form a partnership wherein they will
divide profits in the ratio of 40:60, respectively. The statement of financial position of Tolentino is as follows:

Tolentino Marketing
Statement of Financial Position
April 8, 2018
Assets

Cash P4000
Accounts Receivable P160000
Less: Allowance for Uncollectible Accounts 16000 144000
Inventory 200000
Equipment P50000
Less: Accumulated Depreciation 10000 40000
Total Assets P388000
Liabilities and Capital
Accounts Payable P36000
Tolentino, Capital 352000
Total Liabilities and Capital P388000
Conditions agreed upon before the formation of the partnership:
a. The accounts receivable of Tolentino is estimated to be 70% realizable.
b. The accumulated depreciation of the equipment will be increased by P10000
c. The accounts payable will be assumed by the partnership.
d. The capital of the partnership is based on the adjusted capital balance of Tolentino.
Tan is to contribute cash in order to make the partner’s capital balances proportionate to the profit and loss ratio.
Required:
1. Prepare the necessary journal entries in the books of Tolentino.
2. Prepare the opening journal entries in the books of the partnership.
1. Prepare the necessary journal entries in the books of Tolentino.
Tolentino, Capital 32000
Allowance for Uncollectible Accounts 32000
Tolentino, Capital 10000
Accumulated Depreciation 10000
2. Prepare the opening journal entries in the books of the partnership.
*Tolentino
Cash 4000
Accounts Receivable 160000
Inventory 200000
Equipment 50000
Allowance for Uncollectible Accounts 48000
Accumulated Depreciation 20000
Accounts Payable 36000
Tolentino, Capital 310000
*Tan
Cash 465000
Tan, Capital 465000