AFAR-2- Quizzes - Acgsbdjxjcudhdh PDF

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Quiz # 1 Topics covered: Partnership Formation and OperationsItem 1 - 9 July 1, 2020, AA and BB decided to form a partnership. The firm is to take over business assets and assume liabilities, and capitals are to be based on net assets transferred after the following adjustments: a. AA and BB's inven...

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Quiz # 1

Topics covered: Partnership Formation and Operations

Item 1-9 1-9.On July 1, 2020, AA and BB decided to form a partnership. The firm is to take over business assets and assume liabilities, and capitals are to be based on net assets transferred after the following adjustments: a. AA and BB's inventory is to be valued at P62,000 and P44,000, respectively. b. Accounts receivable of P4,000 in AA's books and P2,000 in BB's books are uncollectible. c. Accrued salaries of P8,000 for AA and P10,000 for BB are still to be recognized in the books. d. Unused office supplies of AA amounted to P10,000, while that of BB amounted to P3,000. e. Unrecorded patent of P14,000 and prepaid rent of P9,000 are to be recognized in the books of AA and BB, respectively. f. AA is to invest or withdraw cash necessary to have a P40% interest in the firm. Balance sheets for AA and BB on July 1 before necessary adjustments are given below: AA BB P62,000 P100,000 Cash 52,000 40,000 Accounts Receivable 64,000 48,000 Inventory 10,000 Office Supplies 40,000 48,000 Eqpt. (18,000) (6,000) Acc. Dep'n - Eqpt. P200,000 P240,000 Total Assets P56,000 144,000 P200,000

P40,000 Accounts Payable 200,000 Capitals P240,000 Total Liab. & Capital

Solution: Unadj capital Inventory A/R Accrued Office supplies Patent Prepaid rent Adjusted capital

AA 144,000 (2,000) (4,000) (8,000) 10,000 14,000 154,000

BB 200,000 (4,000) (2,000) (10,000) 7,000 9,000 186,000

1.The net capital adjustment in the book of AA is a net credit of 1,000 Adjusted (AA) 154,000 Unadjusted (144,000) Adjustment 1,000 2. The net capital adjustment in the book of BB is a net debit of 14,000 Adjusted (AA) 186,000 Unadjusted (200,000) Adjustment (14 (14,000) ,000) 3. The additional investment made by AA 0

4. The withdrawal made by AA is 3,000 186,000/60% = 310,000*40% =24,000 TAC- 154,000 TCC = 30,000 withdr withdraw aw awal al

5. How much is the total assets of the partnership after formation? 424,000

Total liablities 114,000 Total capital 310,000 Total assets 424 424,000 ,000 6. How much is the total liabilities of the partnership after formation? 114,000, Accrued (8,000+10,000) A/P Total

7. How much is the AA capital BB capital Total capital

18,000 96,000 114,000

total capital of the partnership after formation? 310,000 124,000 186,000 310,000

8. The capital balance of AA in the combined balance sheet is? 124,000 9. The capital balance of BB in the combined balance sheet is? 186,000 10.

A = Total Capital before admission B = Total Capital after admission C = New Partner’s Agreed Capital D = New Partner’s Contributed Capital E = Old Partners’ Capital before admission F = Old Partners’ Capital after admission Assuming the new partner was admitted by way of purchase, with assets being revalued before admission, which may be true? AE A A=B and C=D A=B and F Your answer to question 10 is wrong. Correct answers: A...