Investment of Partners

On April 15, 20AB, Para and Luman formed a partnership with the following investments:

PARALUMAN

CashP55,000

FurnitureP66,000

EquipmentP192,000

The market values of the non-cash assets were P44,000 for the furniture and P165,000 for the equipment. Para and Luman's profit and loss sharing ratio is 1:3, respectively.

Requirements:

1. If the capital of each partner is based on his/her contributions, give the entry to record the partnership formation

2. If the partners agree that their capital should be equal so that the partner with the lower capital will make additional cash investment, who will make the investment and how much?

3. Assuming that Luman's agreed capital is P275,000, how much cash investment must he take?

4. Assuming that Para's investment is equal to 30% of the total capital, how much additional investment should Luman make?

Partnership Formation

Bobby and Cobby agreed to combine their business and form a partnership. The ledger accounts prior to adjustment showed the following balances:

BobbyCobby

Cash P 84,000P 126,000

Accounts Receivable63,000105,000

Inventory157,00052,500

Equipment 63,000

Accumulated Depreciation (21,000)

Accounts Payable(21,000)

The following adjustments are to be made for the purposes of establishing the capital credit of the partners:

1. Ten percent (10%) bad debts (impairment loss) should be provided on the outstanding accounts receivable

2. The market value of the inventory is 80% of cost

3. The carrying amount of the equipment is only P33,600

4. Bobby will recognize prepaid expenses of P8,400

5. Cobby will recognize accrued expenses of P6,825

Give all the entries necessary for the following scenarios:

a. Book of Bobby will be used

b. Book of Cobby will be used

c. New set of books will be used by the partnership