Business Combination

1. Teddy, Bobbie, Alex, and Gabbie organized a partnership called Four Sisters. Their business isengaged in providing wedding services. Teddy and Bobbie contributed cash of P600,000 each. Alexcontributed building which she inherited from her father three (3) years ago. For the transfer taxpurposes, the value of the building was P900,000. A week before the partnership was formed, severalbuyers signify their intention of buying the building for P920,000. The building has been subjected to amortgage with a carrying amount of P200,000, which will be assumed by the partnership. Gabbie, beingan event planner, contributed her skills and knowledge to the partnership. The partners agreed thatGabbie would be given a salary of P15,000. She will also receive 20% of the remaining profits.

a. What is the value of the building contributed by Alex?

b. Give the entry to be made at the date of formation.

2. Cyril, Joseph, and Reggie formed a partnership named CJR Partnership Ltd. Cyril contributed cash ofP150,000 and his store equipment that originally cost P160,000 with the second value of P125,000.Joseph will contribute P180,000 cash while Reggie, whose family sells computers, will contributeP250,000 cash and a brand-new computer that cost his family's computer dealership P150,000 but witha regular selling price of P160,000. They agreed to share profits and losses equally.

a. Assuming that you are hired as the new accountant of the new partnership, how will you record the

contributions made by Cyril and Reggie?

b. What is the entry to be made at the date of formation.

II. OPERATION AND DISSOLUTION

1. Partners MM and LL have profit and loss agreement with the following provisions: salaries of P30,000and P45,000 for MM and LL, respectively; a bonus to MM of 10% net income after salaries and bonus;and interest of 10% on average capital balances of P20,000 and P35,000 for MM and LL, respectively.One-third of any remaining profits will be allocated to MM and the balance to LL. If the partnership hada net income of P104,500, how much should be allocated to MM, assuming the provisions of the profitand loss agreement are ranked by order of priority, starting with salaries?

2. Renalie and Ben are partners who share profits and losses in the ratio of 6:4, respectively. On June 1,

20X2, their respective capital accounts were as follows:

Renalie - P60,000

Ben - P50,000

On the same date, Jeremiah was admitted as a partner with 1/5 interest in capital and profits for an

investment of P40,000.

What is the capital of Ben after Jeremiah's admission if the partnership began with a total capital of:

a. P150,000

b. P200,000

1. Partners Gaylee, Jandra, and Debby have capital balances of P50,000, P90,000, P20,000, respectively.They split profits in the ratio of 4:4:2, respectively. Under a safe cash distribution plan, who among thepartners will get the first distribution?

2. The following condensed balance sheet is presented for the partnership of Joseph and Emman, whoshare profits and losses in the ratio of 60:40, respectively:

Other Assets P500,000

Emman, loan 20,000

Total P520,000

Accounts Payable P120,000

Joseph, Capital 220,000

Emman, Capital 180,000

Total P520,000

The partners decided to liquidate the partnership. If the assets are sold for P345,000, what amount of

the available cash should be distributed to Emman?