Partnerships: Basic Considerations and Formation | 477 The name of the partnership will be Medina and Dalangin Hunting Gears. The partners have agreed to effect the following adjustments: a. Medina's merchandise inventory is to be reduced by P105,200. The inventory of Dalangin will be increased by P7,200. b. The following are the fair market values of the various assets: Land Building Office Equipment Repair Equipment Medina Dalangin P108,000 192,000 16,000 P40,000 124,000 c. One-half of the notes payable of Medina are personal notes. All other liabilities of the partners are assumed by the partnership. d. The prepaid rent in the books of Dalangin will be consumed by the partnership. Required: Prepare the journal entries to record the formation of the partnership. Problem #5 Two Sole Proprietors Form a Partnership Medina and Dalangin are fierce competitors who sell hunting equipment. They finally decided to join forces in order to increase their business and reduce costs. An agreement is reached between the two to begin operations as a partnership on Mar. 1, 2021. Medina and Dalangin have decided to share profits or losses in the ratio of 60:40, respectively. The statements of financial position of Medina and Dalangin as at Mar. 1, 2021 are as follows: Medina Dalangin Cash Accounts Receivable Allowance for Uncollectible Accounts P 42,000 P 30,000 389,200 169,200 (22,400) (14,400) Merchandise Inventory 461,600 300,800 Prepaid Rent 6,000 Office Supplies 30,400 4,000 Land 40,000 Building 128,000 Accumulated Depreciation (32,000) Office Equipment 24,000 62,000 Accumulated Depreciation (6,000) (13,200) Repair Equipment 172,000 Accumulated Depreciation (68,000) Total Assets P1,158,800 P544,400 Notes Payable Accounts Payable Mortgage Payable P 120,000 170,000 P111,600 200,000 Medina, Capital 668,800 Dalangin, Capital 432,800 Total Liabilities and Owners' Equity P1,158,800 P544,400