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    Advanced Accounting Solution ManualAntonio J. Dayag

    Chapter 1

    Problem I

    Requirement 1Assuming that A and B agree that each partner is to receive a capitalcredit equal to the agreed values of the net assets each partner invested:!o record ad"u#tment#nothing to adjust since both of them have no set of books.!o clo#e the boo$#nothing to close since both of them have no set of books.!o record inve#tment# Partnership books:

    Cash. 120,000Inventory. 120,000Equipment.. 240,000

    A, capital... 480,000Initial investment.

    Cash.. 120,000

    Lan.. 240,000!uilin". 480,000#ort"a"e paya$le. 240,000!, capital.. %00,000

    Initial investment.

    Requirement %Assuming that Aand B agree that each partner is to receive an equalcapital interest.!o record ad"u#tment#nothing to adjust since both of them have no set of books.!o clo#e the boo$#nothing to close since both of them have no set of books.!o record inve#tment# Partnership books: &onu# Approach

    Cash 120,000Inventory 120,000Equipment. 240,000

    A, capital.. 480,000

    Cash 120,000Lan. 240,000!uilin" 480,000

    #ort"a"e paya$le 240,000!, capital.. %00,000

    !, capital.. %0,000A, capital %0,000

    Total agreed capital (P4!"!!! # P$!!"!!!%&.P '"!!"!!! ultiplied b): *apital interest (equal%&&&... '+, Partner-s individual capital interest&&&&&.P 4!"!!!

    /ess: A-s capital interest&&&&&&&&&..&.4!"!!! Bonus to A&&.&&&&&&&&&&&&&&..P $!"!!!

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    Revaluation '(ood)ill* ApproachCash 120,000Inventory 120,000Equipment. 240,000

    A, capital.. 480,000

    Cash 120,000Lan. 240,000!uilin"... .480,000

    #ort"a"e paya$le 240,000!, capital..%00,000

    Assets &or "oo'ill or intan"i$le asset(... 120,000A, capital.... 120,000

    )otal a"ree capital &*%00,000 + 1+2(...*1,200,000Less )otal contri$ute capital &*480,000 -

    * %00,000(.... 1,080,000oo'ill to A...* 120,000

    Problem II

    Agreed 0air 1alues2nvested

    b) 3ohn2nvested b) 3e

    2nvested b) 3ane

    *ash P'!!"!!! 5 5 5 5 5 56quipment P ''!"!!! 5 5 5

    Total assets '!!"!!! P ''!"!!! !7ote pa)able assumed b) partnership 5 5 5 8!"!!! 5 5 57et assets invested P'!!"!!! P !"!!! P !

    1. &onu# Method %. (ood)ill Method 'Revaluation o+A##et**ash '!!"!!!

    *ash '!!"!! 6quipment ''!"!!!

    6quipment ''!"!! 9oodill ;!"!!!

    7ote Pa)able 7ote Pa)able 8!"!!

    3ohn" *apital 3ohn" *apital ;!"!!

    3e" *apital 3e" *apital ;!"!!

    3ane" *apital 3ane" *apital ;!"!!

    ,. The bonus method is used hen3ohn and 3e recognis capital account.

    The goodill method is used hen the partners recogni

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    the partners. @nless the intangible asset can be speci=call) identi=ed" such as a patentbeing invested" it should not be recogni

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    Adjusting entries 7+A Ges*losing entries (real accounts% 7+A 7o2nvestments GesJJBalance Dheet Ges

    J Books of ?K Partnership books JJ 2nvestments of individualK additional investments or ithdraals of sole proprietor.

    1. Books of Sole Proprietor (H):a. !o record ad"u#tment#

    a. /, capital 1,800Allo'ance or ou$tul accounts. 1,800

    Aitional provision compute as ollo'sequire allo'ance 10 3 *48,000 * 4,800Less *revious $alance 5,000

    Aitional provision * 1,800

    $. Interest receiva$le or accrue interest income. 5,%00/, capital 5,%00

    Interest income or nine months compute as ollo's

    *%0,000 3 8 3 6+12 *5,000.

    c. /, capital.. %,000#erchanise inventory.. %,000

    7ecline in the value o merchanise. *2,000 9 *21,000 *%,000.

    . /, capital. 4,800Accumulate epreciation. 4,800

    :ner epreciation.

    e. *repai e3penses... 2,400/, capital 2,400

    E3penses pai in avance.

    /, capital ,200Accrue e3penses. ,200

    :nrecore e3penses.

    oteAll adjustment that reLects nominal accounts should be coursedthrough the capital account" since all nominal accounts are alread) closed atthe time of formation.

    b. !o clo#e the boo$#nothing to close since the books of ? ill be retained.c. !o record inve#tment

    Cash. 11%,100

    I, capital 11%,100

    Initial investment compute as ollo's:na;uste capital o /* 24%,000

    A &euct( a;ustmentsa. 7ou$tul accounts......& 1,800($. Interest income.. 5,%00c. 7ecline in the value o merchanise.& %,000(. :ner

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    Accrue e3penses...& ,200(A;uste capital $alance o /.....* 252,2007ivie $y Capital interest o / 2+5)otal a"ree capital..* 548,500#ultiplie $y Capital interest o I.. 1+5Investment o I* 11%,100

    oteThe initial investment of ? is alread) recorded since his books arealread) retained. 7o further entr) is required since there are no additionalinvestments or ithdraals made b) ?.

    ,. The balance sheet for both cases presented above is as follos:

    ?2 PartnershipBalance Dheet

    7ovember '" ,!H4

    Assets*ash P ,8$"'!!

    Accounts receivables P 4"!!!/ess: Alloance for doubtfulaccounts&&&...........

    4"!! 48",!!

    7otesreceivable&&...................................................

    $!"!!!

    2nterestreceivable&&&&&&..................................

    8"$!!

    erchandise2nventor)................................................

    ,'"!!!

    PrepaideHpenses&&&&..........................................

    ,"4!!

    6quipment (net%&&&&.............................................

    P F,"!!!

    /ess: Accumulated depreciation&&&&&&........ '!"!! $'",!!TotalAssets....................................................................

    P 4,F"!!

    /iabilities and *apital/iabilities AccruedeHpenses&&.. .......................................

    P F",!!

    Accountspa)able...................................................

    ',"!!!

    7otespa)able&&&&...........................................

    $!"!!!

    Total/iabilities................................................................

    P F;",!!

    *apital........................................................................... ?"capital&&&&&&&&&..................................

    P ,8,",!!

    2"capital&&&&&&&...........................................

    ''$"'!!

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    Total*apital..................................................................

    P 84"8!!

    Total /iabilities and*apital..........................................

    P 4,F"!!

    Problem ,

    e) #et o+ boo$#. The folloing procedures are to be folloed:

    Dole Proprietor versus Dole ProprietorBooks of

    DoleProprietor(Baker%

    Books ofDole

    Proprietor(*arter%

    J7e Det ofBooks

    Adjusting entries Ges Ges*losing entries (realaccounts%

    Ges Ges

    2nvestments GesJJBalance Dheet Ges

    J Partnership books JJ Additional investments or ithdraals of sole proprietors.

    1. Books of Sole Proprietora. !o record ad"u#tment#

    &oo$# o+ J &oo$# o+ / a. 3" capital&&&&&&&&&&',"!!! erchandise 2nventor)&&',"!!! Iorthless inventor).

    a. erchandise 2nventor)&&&& $"!!! M" capital&&&&&&&&&$"!!! @pard revaluation.

    b. 3" capital&&&&&&&&&& F",!! Alloance for doubtful

    Accounts&&&&&&&..F",!! Iorthless accounts.

    b. M" capital&&&.&&&&&&&. 8"!!! Alloance for doubtful

    accounts&&&&&&&&.8"!!! Additional provision. equired alloance:

    N H P'!"!!!&&.. P;"!!! /ess: Previous

    Balance&&&.. $"!!! Additional

    Provision....&&&&P8"!!!c. ent receivable&&&&&&&',"!!! 3" capital&&&&&&&&.',"!!! 2ncome earned.

    c. M" capital&&&&&&&&&&&. ;"$!! Dalaries pa)able&&&&&&.;"$!! @npaid salaries.

    d. 2nterest receivable&&&&&&&'",!! M" capital&&&&..................'",!! 2nterest income from August 'F to ctober '. P$!"!!! H '$N H 4+8$!

    e. 3" capital&&&&&&&&&& "4!! Cce supplies&&&&&&."4!!

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    6Hpired oCce supplies.f. 3" capital&&&&&&&&&& $"!!! Accumulated depreciation 5 equipment&&&&&&$"!!! @nder5depreciated.

    g. M" capital&&&&&&&&&&&',"!!! Accumulated depreciation5 0urniture and =Htures&&&',"!!! @nder5depreciated.

    h. 3" capital&&&&&&&&&&. '"!! 2nterest pa)able&&&&&.'"!! 2nterest eHpense from

    3ul) ' to ctober '. P$!"!!! H ',N H 8+',

    i. Patent&&&&&&&&&&&&. 4"!!! M" capital&&&&&&&&..

    4"!!! @nrecorded patent.@nadjusted capital of 3&&.&&&.P8F,"!!!Add(deduct%: adjustments: a. Iorthless merchandise&&..( ',"!!!% b. Iorthless accounts&&&&.( F",!!% c. ent income&&&&&&.&.',"!!! e. Cce supplies eHpense&&.( "4!!%

    f. Additional depreciation&&( $"!!!% h. 2nterest eHpense&&&&&&( '"!!%Adjusted capital of 3&&&&&&&P84"$!!

    @nadjusted capital of M..&&&&&...P48,"!!!Add(deduct%: adjustments: a. erchandise revaluation&&..$"!!! b. Iorthless accounts&&&&&.( 8"!!!% c. Dalaries&&&&&.&&.&&&..( ;"$!!% d. 2nterest income&&&&&&&..'",!!

    g. Additional depreciation&&&( ',"!!!% h. Patent&&&&.&&&.&&&&.4"!!!Adjusted capital of M&.&&&&&&..P4$,"$!!

    b. !o clo#e the boo$#&oo$# o+ J &oo$# o+ /

    Alloance for doubtfulaccounts................................. ',"!!!

    Accumulated depreciation Oequipment&&&&&&&& $!"!!!

    Accounts pa)able&&&&&';"$!!7otes pa)able&&&&&&& $!"!!!2nterest pa)able&&&&&&. '"!!

    3" capital&&.&&&&&&&.84"$!! *ash&&&&&&&&&&;!"!!! Accounts receivable&&.,'$"!!! erchandise inventor)&.'!"!!!

    Alloance for doubtfulaccounts................................. ;"!!!

    Accumulated depreciation Ofurniture and =Htures &&&. 8$"!!!

    Accounts pa)able&&&&&. ',!"!!!Dalaries pa)able&&&&&&. ;"$!!M" capital&&.&&&&&&&. 4$,"$!!

    *ash&&&&&&&&&&.4"!!! Accounts receivable&&..'!"!!! 7otes receivable&&&&. $!"!!! 2nterest receivable&&&...'",!!

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    Cce supplies&&&&&.,4"!!! 6quipment&&&&&&&.',!"!!! ent receivable&&&&...',"!!!

    *lose the books of 3.

    erchandise inventor)&..'!"!!! 0urniture and =Htures.&&..'44"!!! Patent&&&&.&&&&&.4"!!!

    *lose the books of M..

    %. e) Set o+ &oo$# 0!o record inve#tment#

    *ash&&&&&&&&&&&&&&&&&&&&&&&&. ;!"!!!Accounts receivable&&&&&&&&&&&&&&&&.. ,'$"!!

    !erchandiseinventor)&&&&&&&&&&&&&&&..

    '!"!!!

    Ccesupplies&&&&&&&&&&&&&&&&&&&..

    ,4"!!!

    6quipment (net%&&&&&&&&&&&&&&&&&&...

    $!"!!!

    ent eceivable&&&&&&&&&&&&&&&&&&.. ',"!!! Alloance for doubtfulaccounts&&&&&&&&.

    ',"!!!

    Accountspa)able&&&&&&&&&&&&&&&..

    8;"$!!

    7otespa)able&&&&&&&&&&&&&&&&&.

    $!"!!!

    2nterestpa)able&&&&&&&&&&&&&&&&..

    '"!!

    3"capital&&&&&&&&&&&&&&&&&&&&

    4$"$!!

    *ash&&&&&&&&&&&&&&&&&&&&&&&&. 4"!!!

    Accounts receivable&&&&&&&&&&&&&&&&.. '!"!!!

    7otes receivable&&&&&&&&&&&&&&&&&&. $!"!!!2nterestreceivable&&&&&&&&&&&&&&&&&..

    '",!!

    erchandiseinventor)&&&&&&&&&&&&&&&..

    '!"!!!

    0urniture and =Htures (net%&..&&&&&&&&&&&&..

    '!"!!!

    Patent&&&&..&&&&&&&&&&&&&&&&&&... 4"!!! Alloance for doubtfulaccounts&&&&&&&&.

    ;"!!!

    Accountspa)able&&&&&&&&&&&&&&&..

    ',!"!!!

    Dalaries pa)able&.&&&&&&&&&&&&&&&.

    ;"$!!

    M"capital&&&&&&&&&&&&&&&&&&&&

    4$,"$!!

    8.- I

    @nadjusted capital (refer to 'a% P8F,"!!! P48,"!!!

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    Adjusted capital (refer to 'b% 84"$!! 4$,"$!!7et adjustments (debit%+credit (P ,8"4!!% P 8!"$!!

    4. The balance sheet after formation is as follos:

    3 and M Partnership

    Balance Dheet

    ctober '" ,!H4

    Assets*ash...............................................................................

    P '44"!!!

    Accounts

    receivables .................................................

    P8;$"!!!

    /ess: Alloance for doubtfulaccounts&&&.........

    ,'"!!! 8F"!!!

    7otesreceivable&&...................................................

    $!"!!!

    2nterestreceivable&&&&&&..................................

    '",!!

    entreceivable&&&&&&.......................................

    ',"!!!

    erchandise2nventor)................................................

    88!"!!!

    Ccesupplies...............................................................

    ,4"!!!

    6quipment (net%&&&&.............................................

    $!"!!!

    0urniture and =Htures (net%&&&&&&&.................

    '!"!!!

    Patent&&&&&&&&...............................................

    4"!!!

    TotalAssets....................................................................

    P'"'$,",!!

    /iabilities and *apital/iabilities Dalaries

    pa)able&&&&&...................................

    P ;"$!!

    Accountspa)able..................................................

    ';"$!!

    7otespa)able&&&&..........................................

    $!"!!!

    2nterestpa)able&&&&&....................................

    '"!!

    Total/iabilities..............................................................

    P ,8'"!!!

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    .*apital 3"capital&&&&&&&&&..................................

    P 4$"$!!

    M"capital&&&&&&&.........................................

    4$,"$!!

    Total*apital..................................................................

    P ;8'",!!

    Total /iabilities and*apital..........................................

    P'"'$,",!!

    Problem ,I'. Total assets O P'"!;4"!!!" at fair value,. Total liabilities 5 P4!"!!!" at fair value8. Total capital 5 P4"!!! (P'"!;4"!!! O P4!"!!!%

    Balance Dheet3anuar) '" ,!!;A##et# iabilitie# and

    Capital*ash P

    F!"!!!/iabilities

    Account eceivable (net% '!"!!! Accounts Pa)able P';!"!!!

    erchandise 2nventor) ,!"!!! ortgage Pa)able 8!"!!!

    Building (net% $!!"!!! Total /iabilities P4!"!!!

    0urniture and 0iHture (net% '!"!!! *apital:Accounts Pa)able /" *apital P

    ,$!"!!!ortgage Pa)able " *apital ,;4"!!!

    Total *apital P4"!!!

    Total Assets P'"!;4"!!!

    Total /iabilities and*apital

    P'"!;4"!!!

    Multiple Choice Problem#'. c O P4"!!!,. d O the prevailing selling price hich is also the fair market value.8. b 5 (P4!!"!!! 5 P';!"!!!% # QP,F!"!!! 5 (P4!!"!!! 5 P';!"!!!%R+8 S P,8!"!!!4.c.b 5 P$!"!!! # P!"!!! # P'!!"!!! S P,4!"!!!$. c 5 P8!"!!! # P!"!!! # P,"!!! S P'!"!!!+8 S P8"!!! 5 P8!"!!! S P"!!!F. a

    Total Agreed *apital (P!"!!!+4!N%&&&&&&&&&&...............

    P',"!!!

    /ess: Total *ontributed *apital (P$"!!! # P!"!!!%&&..................

    ''"!!!

    9oodill (revaluation of assets upard% P '!"!!!

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    &&&&&&&..................

    Assets" fair value (P,!"!!! # P$!"!!! # P'"!!!%&&&&&&&&&&P ;"!!!/ess: /iabilities assumed&&&&&&&&&&&&&&&&&&&..& 8!"!!!Bill" capital..&&&&&&&&&&&&&&&&&&&&&&&&&& P $"!!!

    . b The capital balances of Iilliam (II% and artha (% at thedate of partnership formation are determined as follos:Iilliam artha

    *ash P,!"!!! P 8!"!!!2nventor) 5 '"!!!Building 5 4!"!!!0urniture and equipment '"!!! 5

    Total P8"!!! P "!!!/ess mortgage assumed b) partnership ('!"!!!%Amounts credited to capital P8"!!! P F"!!!

    ;.c

    6van ?elen@nadjusted capital ;"$, 88"!!Add (deduct% adjustments: Alloance ( % ( 4!% Eepreciation ( ;!!%Adjusted capital ;"!F! 8,"';

    '!. c: 3ones O P!"!!! # P4!!"!!! O P',!"!! S P8$!"!!! Dmith O P4!"!!! # P,!"!!! O P$!"!!! S P,$!"!!!

    ''. c O P8"8F4 O refer to 7o. ',',. c O P'F"$F

    @nadjusted capital of **&&&&&&&&&&&&&&&&&&&&&&&&&.P 88"!!!Add (deduct%: adjustments5

    Alloance for doubtful accounts (8N H P'4",!!%&&&&&&&&&&&&...( 4,$%2ncrease in merchandise inventor) (P,8"!!! O P,!"!!!%&&&&&&&&&& 8"!!!Prepaid salar)&&&&&&&&&&&&&&&&&&&&&&&&&&&&.... $!!Accrued rent eHpense&&&&&&&&&&&&&&&&&&&&&&&&&( !!%

    Adjusted capital balance of **&&&&&&&&&&&&&&&&&&&&&&P 8"8F4Eivided b): *apital interest of **&&&&&&&&&&&&&&&&&&&&.... ,+8

    Total capital of the partnership&&&&&&&&&&&&&&&&&&&&&&&P 8"!$'/ess: Adjusted capital balance of **&&&&&&&&&&&&&&&&&&&.. 8"8F4*apital balance of EE&&&&&&&&&&&&&&&&&&&&&&&&&&.. P 'F"$F

    '8. a

    Total assets:*ash P F!"!!!achiner) F"!!!Building ,,"!!! P 8F!"!!!

    /ess /iabilities (ortgage pa)able% ;!"!!!7et assets (equal to 00-s capital account% P ,!"!!!

    '4. d00" capital (see no.'8% P ,!"!!!Eivide b) 00-s P / share percentage F!N

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    Total partnership capital P 4!!"!!!equired capital of ** (P4!!"!!! H 8!N% P ',!"!!!/ess: Assets alread) contributed:

    *ash P 8!"!!!achiner) and equipment ,"!!!0urniture and =Htures '!"!!! $"!!!

    *ash to be invested b) ** P "!!!

    '. aAgreed 0air 1alues 2nvested

    b) 3ohn2nvested b) 3e

    2nvested b) 3ane

    *ash '!!"!!! 5 5 5 5 5 56quipment ''!"!!

    ! 5 5 5

    Total assets '!!"!!! ''!"!!! !7ote pa)able assumed b) partnership 5 5 5

    8!"!!! 5 5 5

    7et assets invested '!!"!!! !"!!! !

    Bonus ethod 9oodill ethod

    *ash '!!"!

    *ash '!!"!! 6quipment ''!"!

    6quipment ''!"!! 9oodill ;!"!!

    7ote Pa)able 7ote Pa)able 8!"!!

    3ohn" *apital 3ohn" *apital ;!"!!

    3e" *apital 3e" *apital ;!"!!

    3ane" *apital 3ane" *apital ;!"!!

    Note:)he $onus metho is use 'hen =ohn an =e> reco"ni?e that =ane is $rin"in" somethin" ovalue to the @rm other than a tan"i$le asset, $ut they o not 'ant to reco"ni?e an intan"i$leasset. )o equali?e the capital accounts, *40,000 is transerre rom =ohns capital accountan *20,000 is transerre rom =e>s capital account.

    )he "oo'ill metho is use 'hen the partners reco"ni?e the intan"i$le nature o the sBills=ane is $rin"in" to the partnership. /o'ever, the capital accounts are equali?e $yreco"ni?in" an intan"i$le asset an a corresponin" increase in the capital accounts o thepartners. :nless the intan"i$le asset can $e speci@cally ienti@e, such as a patent $ein"investe, it shoul not $e reco"ni?e, $ecause o a lacB o ;usti@cation or "oo'ill in a ne'$usiness.

    '$. c O refer to 7o. ' for computation.

    'F. a00" capital:@nadjusted balance P F"!!!Adjustments:

    Accumulated depreciation ( '"!!%Alloance for doubtful account (',"!!!%Adjusted balance P 48"!!

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    99" capital: @nadjusted balance P 4;"!! Adjustments:

    Accumulated depreciation ( 4"!!%Alloance for doubtful account ( 4"!!%Adjusted balance P 4!"!!

    '. c99-s adjusted capital (see no. 'F% P 4!"!!Eivide b) 99-s P / share percentage 4!N

    Total partnership capital P '!'",!ultipl) b) 00-s P / share percentage $!N00-s capital credit $!"F!00-s contributed capital (see no. '% 48"!!Additional cash to be invested b) 00 P

    'F",!

    ';. dTotal capital of the ne partnership (see no. ,!% P ,;$"F

    ultipl) b) -s interest ,!N*ash to be invested b) P ;"8F

    ,!. (a% PP Total

    ($!N% (4!N%@nadjusted capital balances P'88"!!! P'!"!!!

    P,4'"!!!Adjustments:

    Alloance for bad debts ( ,"F!!% ( '"!!% ( 4"!!%2nventories 8"!!! ,"!!!

    "!!!Accrued eHpenses ( ,"4!!% ( '"$!!% ( 4"!!!%

    Adjusted capital balances P'8!";!! P'!$"$!! P,8F"!!

    Total capital before the formation of the ne partnership (see above% P ,8F"!!Eivide b) the total percentage share of and PP (!N # 8!N% !N

    Total capital of the partnership after the admission of P ,;$"F

    ,'. aAgreed *apital *ontributed *apital Dettlement

    P'4"48F.! (!N H P,;$"F% P '8!";!!P 'F"8F.!PP ;"!$,.! (8!N H P,;$"F% '!$"$!!

    ('F"8F.!%

    Therefore" ill pa) PP P'F"8F.!

    ,,. cTotal partnership capital (P''8"$4!+'+8% P 84!";,!/ess EE-s capital ''8"$4!**-s capital after adjustments P ,,F",!Adjustments made:

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    Alloance for doubtful account (,N H P;$"!!!% '";,!erchandise inventor) ( '$"!!!%Prepaid eHpenses ( ",!!%Accrued eHpenses 8",!!

    **-s capital before adjustments P ,''",!!

    ,8. aAssets invested b) **: *ash:

    *apital P,''",!!Add Accounts pa)able 4;"$!!

    Total assets (eHcluding cash% ,$!"!!/ess 7oncash assets (;$"!!! # P'44"!!!% ,4!"!!! P,!"!!

    Accounts receivable (;$"!!! O P'";,!% ;4"!! erchandise inventor) '$!"!!! Prepaid eHpenses ",!! P,!"!!*ash invested b) EE ''8"$4!

    Total assets of the partnership P

    8;8"F,!

    ,4. dTotal partnership capital (P'!"!!!+$!N% P 8!!"!!!

    99-s *apital (P8!!"!!! H 4!N% P ',!"!!!/ess *ash investment8!"!!!erchandise to be invested b) 99 P ;!"!!!

    ,. aAdjusted capital of 33:

    Total assets (at agreed valuations% P '!"!!!/ess Accounts pa)able 4"!!! P '8,"!!!

    equired capital of 33 '!"!!!*ash to be invested b) 33 P 4"!!!

    2ui30I'. P,F$"!!! S (P4!"!!! O P,,"!!!% # QP8,4"!!! 5 (P4!"!!! O P,,"!!!%R+8,. Philip" P'!!"!!!K a)" P'!!"!!! and Darah" P;!"!!! (P8!!"!!! O P,'!"!!!%8. P88!"!!!

    P88!"!!! S P!"!!! # (P8'!"!!! 5 P8!"!!!%4.

    c The capital balances of each partner are determined asfollos:

    Apple Blue *ron*ash P!"!

    !!Propert) P !"!!!ortgage assumed (8"!!!%

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    6quipment P "!!!Amount credited to capital accounts P!"!

    !!P 4"!!! P "!!!

    . P'"!!!

    (P';!"!!! O P'$!"!!!% H '+, S P'"!!!$. P'"!!! O the prevailing selling price hich is also the fair market value.F.. P'"!!!P8!"!!! # P!"!!! # P,"!!! S P'!"!!!+8 S P8"!!!

    P!"!!! 5 P8"!!! S P'"!!!;. P4"!!!'!. P,,"!!!

    ''. P8F"!!! S P4!!"!!! O P,"!!!

    ',. P!"!!!

    '8. P,!"!!!

    Pane Sill#

    *ash.................................................................................. P 4!"!!! P 8!"!!!

    achiner) and equipment................................................. '!!"!!!

    Building............................................................................. 8!"!!!

    Dubtotal......................................................................... P'4!"!!! P8!"!!!

    /ess: /iabilit) assumed b) the partnership....................... ('!!"!!!%

    *apital balances" F+'+!$.................................................... P'4!"!!! P,!"!!!

    '4. dAdjusted capital of // P '$";!!*ontributed capital of ,";!

    Total capital P ,4"!

    '. a

    00" capital:@nadjusted balance P F"!!!Adjustments:Accumulated depreciation ( '"!!%Alloance for doubtful account (',"!!!%Adjusted balance P 48"!!

    99" capital:@nadjusted balance P 4;"!!Adjustments:Accumulated depreciation ( 4"!!%Alloance for doubtful account ( 4"!!%Adjusted balance P 4!"!!

    !-45RI4SCompletion #tatement#'.accounting

    ,.9AAP

    8. a. cash $asisinstead of accrual $asis

    b. prior period adjustments

    c. use of air &or current( valuesinstead of historical cost

    d. recognition of goodill in situations notinvolving business combinations

    4.draings

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    16/16

    .fair (or current% values

    $.achievingequityamong the partners

    F.capital balances

    .professional corporation

    !rue or 6al#e

    ; 0alse '4.

    True ';.

    0alse ,4.

    0alse ,;.

    0alse

    '!.

    True '.

    0alse ,!.

    True ,.

    True 8!.

    True

    ''.

    0alse '$.

    0alse ,'.

    0alse ,$.

    0alse

    ',.

    True 'F.

    0alse ,,.

    True ,F.

    True

    '8.

    0alse '.

    True ,8.

    0alse ,.

    True

    Note for the following numbers:17. Indiidu!ls" p!rtnerships" !nd #orpor!tions !re !llowed to be p!rtners in ! p!rtnership.

    1$. %ll of the gener!l p!rtners !re li!ble for !ll the p!rtnership&s debts.'1. ost sm!ll p!rtnerships m!int!in their n!n#i!l inform!tion using the t!* b!sis.'+." ,hile the p!rtnership does not p!- in#ome t!*es" it is responsible for other t!*es su#h !s p!-roll

    t!*es !nd fr!n#hise t!*es.'. /he propriet!r- theor- is b!sed on the notion th!t the business entit- is !n !ggreg!tion of the

    owners'0./his is !n e*!mple of the propriet!r- theor- of euit-.'2.%n- b!sis (i.e." #!rr-ing !lue" t!* b!sis" or m!rket !lue) #!n be used to !lue non#!sh !ssets

    #ontributed to ! p!rtnership

    M7!IP40C-5IC4 274S!I5S8'.

    a 8$.

    d 4'.

    c 4$.

    a '.

    d

    8

    ,.

    B 8

    F.

    b 4,

    .

    c 4F

    .

    c ,

    .

    b

    88.

    a 8.

    c 48.

    a 4.

    b 8.

    b

    84.

    e 8;.

    a 44.

    d 4;.

    b

    8.

    d 4!.

    a 4.

    b !.

    c


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