Activity 4. Sole Proprietor and an Individual with No Business Form a partnership.

Mintes has successfully operated a sari-sari store for a number of years. She wishes to expand the business, but to do so she needs additional capital, which she is unable to supply. She therefore enters into an agreement with Sablay to recognize and continue her business as a partnership called "MS." The partners agree that after revaluation of certain assets, Mintes is to invest her on-going business in the partnership and additional cash from her personal assets to bring her total investment to P50,000.

Sablay is to contribute a computer costing P30, 000 with a fair market value of P25,000,

merchandise inventory worth P10,000 and cash capital sufficient to make his total investment equal to that of Mintes. The accumulated depreciation of the computer is P8,000.

The post-closing trial balance of Mintes just prior to the formation of the partnership appeared

as follows:

Debit Credit Cash P 2,000 Accounts receivable 5,000 Merchandise inventory 10,000 Store equipment 8,000 Accumulated depreciation - store equipment P 1,600 Accounts payable 6,400 Mintes, capital 17,000 P25,000 P25,000