Adam, Boon, and Chelsey decided to form a partnership firm on January 1, 2014. They contributed as follows:

Adam – Computers Php 500,000 and Cash Php 300,000

Boon – Cash Php 700,000 and Delivery Car Php 100,000

Chelsey – Office Building

Php 280,000 and cash Php 520,000

Required:

1. Calculate the initial capital of each partner,

2. Pass journal entries for the above transaction in the books of the partnership firm,

3. Prepare the statement of financial position/ balance sheet on the formation of the partnership.

Problem 

Ryan and Smith were the main competitors in the shoe industry. Due to unhealthy competition between them, On May 15, 2014, they decided to form a new partnership entity with the name RS & Co by merging their businesses. On 15th May 2014, their accounts balances are as follows:

For Mr. Ryan:

Cash 16,000

Account receivable 80,000

Inventory 64,000

Machinery – cost 120,000

Factory equipment – cost 56,000

Accumulated depreciation – machinery 64,000

Accumulated depreciation – factory equipment 24,000

Allowance for doubtful debts 5,600

Accounts payable 64,000

For Mr. Smith:

Cash 24,000

Account receivable 96,000

Inventory 40,000

Machinery – cost 96,000

Factory equipment – cost 64,000

Accumulated depreciation – machinery 32,000

Accumulated depreciation – factory equipment 40,000

Allowance for doubtful debts 3,200

Accounts payable 76,000

In order to complete the formation of a new partnership, the following valuations were agreed upon between Ryan and Smith as follows:

Ryan:

Accounts receivable: Php51,000, inventory at Php 56,000 & machinery at 30,000.

Smith:

Accounts receivable: Php16,000, factory equipment: Php10,000

Required:

1. Record the adjustment to the individual books of the proprietor.

2. Record the closing entries to the books of the individual proprietors.

3. Record the journal entries to form the new partnership.