Contributions are as follows:
Cash P1: 250,000 P2: 1,800,000
Accounts Receivable P1: 430,000 P2: 1,000,000
Land P1: 1,250,000
Building P1: 2,000,000
Accounts payable P1: 330,000 P2: 400,000
Notes payable P2: 500,000
Capital P1: 3,600,000 P2: 1,900,000
Additional Information:
• The cash contribution of Partner 1 as listed above is the peso equivalent of 6,250 foreign currency units (FCU). The current exchange rate is P45: FCU1.
•Partner 2's account receivable should be written down by
P200,OOO.
•The land has an appraised value of P1,500,000.
•The building has an appraised value of P1,400,000.
•Attached to the building is an unpaid mortgage of P800,000. Partner 1 agrees to settle this mortgage immediately using his/her personal funds.
•There is a pending lawsuit over Partner I's contributed properties — a claim by a third party. A discussion with Partner I's legal counsel reveals that it is probable that the plaintiff will accept an out of court settlement of not less than P300,000. The partnership shall assume the obligation of paying the plaintiff.
•There are unpaid real property taxes on the properties contributed by Partner 1 amounting to P40,000. The partners agreed that the partnership shall assume those obligations.
•The notes payable is stated at face amount. An inspection of the related promissory note reveals that the note is a 5-year non-interest bearing note issued 2 years ago and requires a lump sum payment at maturity date. The current rate is 10%.

Requirements:
a. Compute for adjusted balances of your capital accounts.
b. Provide the entry to record your contributions in the
partnership books. (You may or may not use a valuation account for the notes payable.)

Partnership Formation AFAR1