Problem $2$

On June $1,2018,$ AB$,$ CD$,$ and EF decided to pool their assets and form BDF Partnership. After formation the partners will participate in the profits or loss ratio of $40\%,25\%$ and $35\%$ for AB$,$ CD$,$ and EF respectively. The statement of financial position on June $1$ before the adjustments was as follows:

AB CD EF

Cash $42,00028,00034,000$

Accounts receivable $250,000325,000280,000$

Allowance for doubtful accounts $(18,000)(24,000)-$

Notes receivable $--120,000$

Merchandise inventory $75,00090,00060,000$

Prepaid rent $-36,00020,000$

Building $400,000$

Accumulated depreciation $(60,000)$

Equipment $210,000$

Accumulated Depreciation $(25,000)$

Total Assets $689,000640,000514,000$

Accounts Payable $36,00041,00034,000$

Note Payable $240,000$

Capital $653,000359,000480,000$

The firm is to take over business assets and assume business liabilities. Capitals are to be based on net assets transferred after the following adjustments:

a$.4\%$ of the accounts receivable of AB may prove to be uncollectible, while the accounts receivable of CD is estimated to be $90\%$ realizable and accounts receivable of EF amounting to Php $7,000$ is deemed worthless

b$.$ Interest at $15\%$ on notes receivable amounting to Php $90,000$ dated April $1,2018$ should be accrued and interest at $12\%$ on the balance of the notes dated February $1,2018.($use $360$ days$)$

c$.$ The inventory of AB should be valued at Php $90,000,$ while Php $18,000$ of the inventory of CD is considered worthless

d$.2/3$ of the prepaid rent of CD is unexpired, while $$ of the prepaid rent of EF has expired

e$.$ the building is under depreciated by Php $20,000$

f$.$ the equipment is to be valued at Php $160,000$

g$.$ Interest at $10\%$ on notes payable date May $1,2018$ should be accrued. $($use $360$ days$)$

h$.$ AB has office supplies on hand which have been charged to expense amounting to Php $9,000.$ These are still to be used by the partnership

i$.$ Accrued expense of Php $2,450$ is to be recognized in the books of EF

Required: Assume the use of new set of books, prepare:

$1.$ adjusting entries on the books of AB$,$ CD$,$ and EF

$2.$ closing entries on the books of AB$,$ CD$,$ and EF

$3.$ Journal entries to record the investments of AB$,$ CD$,$ and EF under the

a$.$ Net Investment method

b$.$ the partner$$s capital balances are to be made equal with their profit or loss ratio

i$.$ either by withdrawing or investing additional cash

after formation, the new capital of the partnership is based on the adjusted capital balance of AB$,$ so that CD and EF may either withdraw or invest additional cash to make the partners$$ capital balance proportionate to their profit or loss ratio.

ii$.$ bonus method