Required: 1. Prepare the entries to adjust and close books of Arzadon and Escano 2. Prepare the opening entries in the books of the partnership 3. Prepare the statement of financial position as at June 13, 2006

Problem \#6 Two Sole Proprietors Form a Partnership On June 13, 2006, Arzadon and Escano decided to combine their assets and form a partnership. The partnership is to take over the business assets and assume the business liabilities; and capitals are to be based on net assets transferred after the following adjustments: a. Escano's inventory is to be valued at P140,000. b. A 5% allowance for uncollectible accounts is to be established on the accounts receivable of each party. c. Accrued liabilities of P8,000 are to be recognized on Arzadon's books. d. Escano is to be allowed goodwill of P100,000 and is to invest additional cash necessary to have a 60% interest in the new firm. The statements of financial position on June 13 before adjustments are given below: Required: 1. Prepare the entries to adjust and close books of Arzadon and Escano. 2. Prepare the opening entries in the books of the partnership. 3. Prepare the statement of financial position as at June 13,2006