Problem 1: Art, Bart and Cath formed a partnership by contributing 40%, 30% and 30% of the total agreed

capital.

The total cash contribution amounted to P50,000, contributed by Art and Bart.

Noncash asset were contributed by Bart and Cath and the corresponding liability of P5,000 and P10,000 of Bart and Cath
were assumed by the partnership.

Right after the formation, the partnership’s basic accounting equation is P115,000 liabilities and P100,000 capital.

Required: Prepare the journal entries to record the contribution of:

1. Art
2. Bart
3.Cath

Problem 2: Tiong San and Josiah Go decided to form a partnership. Tiong San has a sole proprietorship business with the
following open account balances:

Book Value Market Value

Accounts receivable P40,000 P38,000

Merchandise inventory 80,000 100,000

Furniture 100,000 80,000

Notes payable 200,000 220,000

The partners agreed to name the partnership as TIONG and GO partnership. They agreed that the notes payable of Tiong
San is not to be assumed by the partnership. The Cash contribution of Josiah Go will equal to the capital contribution of
Tiong San.

Required: Journalize the investment of Tiong San and Josiah Go to the TIONG and GO partnership.
Problem 3 Cash, Noncash and Liabilities (assumed)

Chiz and Heart formed an partnership. The following are their contributions:

Chiz Heart

Cash P150,000

Accounts receivable 100,000

Merchandise inventory 120,000

Land P100,000

Building 200,000

Note payable 70,000

Chiz capital 300,000

Heart, capital 300,000

Additional Information:

a. Included in accounts receivable is an account amounting to P10,000 which is deemed uncollectible

b. The inventory has an estimated selling price of P150,000 and estimated cost to sell P20,000
c. An unpaid mortgage of P50,000 on the land is assumed by the partnership.
d. The building has under-depreciated by P40,000
e. The building also has an unpaid mortgage amounting to P28,000 but the mortgage is not assumed by the partnership.
B agreed to settle the mortgage using his personal funds.
f. The note payable is stated at face amount. A proper valuation requires the recognition of a P5,000 discount on note
payable
g. A and B shall share in profits and losses 60% and 40% respectively.

Required:
1. Compute for the adjusted balances in the partner’s capital account.
2. Prepare the journal entry(ies) to record the initial investment of the partners in the partnership’s books.
3. Assume that a partners capital shall be increase accordingly by contributing additional cash to bring the partners’
capital balances proportionate to their profit or loss ratio. Which partners should provide additional cash and how much
is the additional cash contribution?
Problem 4 Journal Entries: First time in Business

Instruction: In your journal book, prepare the compounded journal entries to record the investment of partners under
each independent case pertaining to the formation of partnership.

1. A and B contributed P300,000 each.

2. A to contribute P400,000 cash representing 20% of the total partnership capital and B will contribute the
balance in the form of inventory.

3. A, B, and C agreed that the partnership capital should be P450,000 but there is no agreement how much is to
be contributed by each of the partner.

4. A,B and C to contribute the following:

A-cash ,P100,000
B-land acquired two years ago at P60,000. Its present market value is P100,000
C-merchandise inventory with the fair market value of P80,000 plus P20,000 cash; quoted price of C’s
contribution is P100,000

5. A,B and C contributed the following:

A- Cash, 60,000 and equipment with a book value of P100,000. The partners agreed to value the equipment at
80,000
B-Land with fair market value of 150,000. The land is subject to a mortgage of P30,000 assumed by the
partnership.
C- Industrial partner who shares 10% in the partnership’s profit.
6. A and B to contribute cash equal to total agreed capitalization of P240,000. A to contribute 1/3, and B to contribute
2/3 of the total agreed capitalization.

7. A to contribute cash of P140,000 for 40% of the total agreed capitalization. B to contribute the remaining in cash.

8. A to contribute land with fair market value of P60,000 and book value of P50,000 plus cash. B to contribute P130,000
cash for 65% claim in the partnership’s assets.

9. A to contribute land at agreed value of 75,000 and unpaid mortgage of 25,000 to be assumed by the partnership. B to
contribute cash equal to 50% of total partnership’s capitalization based on A’s contribution.

10. A to contribute his skill as industrial partner. B to contribute cash for the total partnership capitalization of P250,000

11. A to contribute his skill plus P50,000 cash as industrial-capitalist partner. B to contribute cash equal to 75% of total
agreed capitalization.

12. A to contribute in cash the 60% of the total partnership capitalization. B to contribute P140,000 based on agreed
capitalization.
Problem 5:

Sole Proprietor and an Industrial with No Business

The following are the accounts at their normal balances if X, a single proprietorship, prior to its conversion into a
partnership.

Accounts receivable P50,000

Allowance for bad debts 1,000

Equipment 60,000

Accumulated Depreciation - Equipment 20,000

Notes payable 30,000

X capital 59,000

X admits Y as a partner in the partnership with a total agreed capitalization of P200,000 and Y contributes cash that will
gave him 50% claim in the partnership. X will invest additional cash after the proprietorship’s assets and liabilities are
adjusted per agreement as follows:
a. The realizable amount of accounts receivable is P45,000
b. The equipment is to be stated at its depreciated value of P34,000.
c. Accrued interest of P1,000 on the note payable should be recognized.

Required:
a. Journalize adjustments in the books of X.
b. Prepare the journal entry to close the single proprietorship’s books after adjustments are effected.
c. Prepare the journal entry to record the investment of X in the partnership
d. Prepare the journal entry to record the investment of Y in the partnership.
e. Prepare the statement of financial position of the partnership upon formation.
f. Compute the following:
1. The adjusted capital of X in his sole proprietorship.
2. The additional cash that X has to contribute into the partnership.
3. The net assets of the partnership upon formation.
4. Total liabilities of the partnership upon formation.
5. Total cash of the partnership upon formation.
Problem 6:

Bonus Method

A’s single proprietorship has the following balances:

Cash P10,000

Noncash assets 90,000

Accounts payable 25,000

B is invited to invest P125,000 to convert the sole proprietorship into partnership. The noncash assets of the sole
proprietorship are fairly valued. A and B agreed that their respective capital balances would be 40% and 60% of the total
partnership capitalization.

Required: Prepare the journal entries to record the investments of A and B under bonus method.

Problem 6: Actual Investment Method vs. Bonus method

Gano and Koyo formed GK partnership with an agreement to divided profit and losses equally. The following records are
available before the partnership formation:

Book Value Fair Value Book Value Fair Value

Cash P50,000 P50,000 P30,000 P30,000

Accounts receivable 60,000 50,000 70,000 60,000

Merchandise inventory 150,000 130,000

Land 100,000 250,000

Building 200,000 150,000

Furniture and Fixture 250,000 200,000

Accounts payable 20,000

Required:
A. Compute and journalized the contributions of Gono and Koyo in the partnership books using:
1. Actual method
2.Bonus method assuming that the partners agreed to have an equal capital credit balance.
B. Prepare the statement of financial position of GK partnership using:
1. Actual investment method
2. Bonus method assuming that the partners agreed to have an equal capital credit balance.