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subject: Advance Accounting

topic: Partnership

TEST III-Problem Solving 1. Assume that on June 30, 2018, Gerry and Henry, competitors in business, decided to consolidate their business to form a partnership to be called GH Partnership. Their balance sheets on this date are shown below. Gerry Company Balance Sheet June 30, 2018 Assets Liabilities and Capital Cash P5,000 Accounts payable 3,000 Accounts receivable 10,000 Gerry Capital 26,000 Merchandise inventory 8,000 Furniture and fixtures 6.000 Total assets P29,000 Total liabilities and capital P29.000 Henry Company Balance Sheet June 30, 2018 Assets Liabilities and Capital Cash P4,000 Accounts payable P6,000 Accounts receivable 8,000 Henry capital 25,000 Merchandise inventory 10,000 Furniture and fixtures 9.000 Total assets P31,000 Total liabilities and capital P31.000 The conditions agreed by the partners for purposes of determining their interests in the partnership are presented below: a. 10% of accounts receivables is to be set up uncollectible in each book. b. Merchandise inventory of Henry is to be increased by P1,000. c. The furniture and fixtures of Gerry and Henry are to be depreciated by P600 and P900 respectively. Required: (15 points) 1. Prepare the necessary adjusting entries. 2. Prepare the opening journal entries in the books of the partnership. 3. Prepare the balance sheet of the partnership after the formation. na Boom Janual formed a partnership with an investment of P30,000 by Allan and P60,000 by Boom. On December 31,2018, after closing all income and expenses accounts, the Income Summary account shows a credit balance of P60,000, representing the profit for the year 2018. Changes in the capital during 2018 are summarized as follows: Changes in Partners' Capital Accounts Allan Boom Capital balances, January 1, 2018 P40,000 P60,000 Additional investments, March 1 20,000 50,000 Additional investments, August 1 20,000 40,000 Withdrawal, October 1 (20,000) Withdrawal November 1 (50,000) Capital balances, December 31,2018 P60.000 P100,000 Required: Prepare a schedule of profit distribution under the following independent agreements on the division of profits: (20 points) a. In the ratio of beginning capital balances. b. In the ratio of weighted average capitals. c. Interest of 12% on weighted average capitals with any net income or loss to be divided equally. d. Assume that partnership of Allan and Boom has a net income of P190,200 before salaries and bonus to partners. The partnership contract provides for the following: 1. Salaries to Allan and Boom, P30,000 each. 2. Interest on capital balances: Allan P7,000 Boom 3,200 3. Bonus to Allan, 20% of net income after bonus. 4. Remaining profit or loss to be divided equally