PROBLEM 1

On June 30, 2011, Janice and Chrischelle, who has her own retail business, decided to form partnership wherein they will participate in the profits in the ratio of 60% and 40% respectively. The Statement of Financial Position of Chrischelle on this date is presented below: Chrischelle Statement of Financial Position June 30, 2011 Assets Cash P 1,200 Accounts receivable P 48,000 Less: Allowance for bad debts 4,800 43,200 Merchandise inventory 60,000 Furniture and fixture 15,000 Less: Accumulated depreciation 3,000 12,000 Total Assets P 116,400 Liabilities and Capital Accounts payable 10,800 Chrischelle, capital 105,600 Total Liabilities and Capital P 116,400 Conditions agreed upon before the formation of the partnership:

a. The accounts receivable of Chrischelle is estimated to be realizable at 70%.

b. The furniture and fixtures of Chrischelle is under-depreciated by P1,500.

c. All the payables are to be assumed by the partnership.

d. The capital of the partnership is based on the adjusted capital balance of Chrischelle, and Janice is to contribute cash in order to make the partner's capital balances proportionate to the profit and loss ratio.

e. A new set of books will be used by the partnership.

REQUIREMENTS:

1. Prepare the necessary adjusting entries in the books of Chrischelle.

2. Prepare the opening journal entries in the books of the partnership.