Material 1 - Partnership Formation and Operation DOCX

Title	Material 1 - Partnership Formation and Operation
Author	morenaGirl PH
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Summary

SURIGAO EDUCATION CENTER 1 CPA-REVIEW PROGRAM ADVANCED FINANCIAL ACCOUNTING AND REPORTING Bonnie contributed the following: Cost Fair Value MATERIAL # 1- (PARTNERSHIP FORMATION AND OPERATION) Building 235,000 255,000 TOPIC : PARTNERSHIP FORMATION Equipment 168,000 156,000 Straight Problem - 1. On Ja...

Description

SURIGAO EDUCATION CENTER CPA-REVIEW PROGRAM 1 ADVANCED FINANCIAL ACCOUNTING AND REPORTING MATERIAL # 1- (PARTNERSHIP FORMATION AND OPERATION) TOPIC : PARTNERSHIP FORMATION Straight Problem - 1. On January 1, 2016, Ernie and Bert both sole proprietors decided to form a partnership to expand both of their businesses. According to their agreement they will Split profit and loss 75:25 and their initial capital will also reflect that ratio. Ernie Proprietor, Statement of Financial Position, December 31, 2015 ASSETS LIABILITIES & EQUITY Cash 50,000 Accounts Payable 65,000 Accounts Receivable 100,000 Accrued Expenses 55,000 Inventories 75,000 Notes Payable 80,000 Equipment 250,000 Ernie, Capital 90,000 Acc Dep. - Equipment (185 000) ASSETS 290,000 TOTAL LIABILITIES & EQUITY 290,000 Bert Proprietor, Statement of Financial Position, December 31, 2015 ASSETS LIABILITIES & EQUITY Cash 30,000 Accounts Payable 75,000 Accounts Receivable 110,000 Accrued Expenses 90,000 Inventories 85,000 Notes Payable 100,000 Equipment 300,000 Bert, Capital 160,000 Acc Dep. - Equipment (100 000) TOTAL ASSETS 425,000 TOTAL LIABILITIES & EQUITY 425,000 The amounts reflected in the Statement of Financial Position are already at fair value except for the following accounts: Ernie's Accounts Receivable should be P20,000 less than what is stated in his Statement of Financial Position. Both Inventories of Ernie and Bert should be P90,000 and P70,000 respectively. Equipment for Bert has an assessed value of P275,000, appraised value of P250,000 and carrying amount of P200,000. Additional accrued expenses are to be established in the amount of P10,000 for Bert while additional accounts payable of P5,000 should be recorded for Ernie. It is also agreed that all liabilities will be assumed by the partnership, except for the notes payable of Bert which will be personally paid by him. 1. How much is the adjusted capital balance of Betty upon formation? ____________________________________ 2. How much is the capital credit to Ernie upon formation? ________________________________________ 3. How much should Ernie invest as additional cash to be in conformity with their initial capital agreement? ________________________ Straight Problem - 2. Bonnie and Clyde entered into a partnership agreement in which Bonnie to have 55% interest in the partnership and 35% in the profit and loss and Clyde will have 45% interest in the partnership and 65% 111 the profit and loss. Bonnie contributed the following: Cost Fair Value Building 235,000 255,000 Equipment 168,000 156,000 Land 500, 000 525, 000 The building and the equipment had a mortgage of P50, 000 and P35,000, respective1y. Clyde is to contribute P150, 000 cash and an equipment. The partners agreed that only the building mortgage will be assumed by the partnership. 4. What Is the fair value of the equipment which Clyde contributed? _______________________________ 5. What is the amount of total assets of the partnership upon formation? _________________________ Straight Problem - 3. Conrad and Pedro agreed to form a partnership. Conrad is to contribute P135,600 cash and an equipment with a carrying amount of P135,000 and a fair value of P 115,000. The equipment however has a mortgage attached to it and it is agreed that the partners will assume the mortgage. On the other hand, Pedro contributed P240900 cash. The partners share profit and loss in the ratio 4:5. Furthermore, part of the agreement is to bring initial capital in conformity with the profit End loss ratio. 6. What is the amount of mortgage on the equipment? _________________________________ MULTIPLE CHOICE QUESTIONS Problem 1- AK and BK decided to form a partnership on October 1, 2012. Their statement of financial position on this date is: AK BK Cash 65,625.00 164,062.50 Accounts Receivable 1,487,500.00 896,875.00 Merchandise Inventory 875,000.00 885,937.50 1 " J P I M , C P A...