1. As of July 1, 2020, MM and AA decided to form a partnership. Their balance sheets on this date are: Cash P 15,000 P 38,000 Accounts Receivable 680,000 255,000 Allowance for doubtful accounts (140,000) (30,000) Merchandise Inventory 202,000 Machinery and Equipment 150,000 270,000 Total P705,000 P735,000 Accounts Payable 135,000 240,000 MM, capital 570,000 AA, capital - 495,000 Total P705,000 P735,000 The partners agreed that the machinery and equipment of MM is under depreciated by P15,000 and that of AA by P45,000. Allowances for doubtful accounts is to be set up amounting to P120,000 for MM and P40,000 for AA. The partnership agreement provides for the profit and loss ratio and capital interest of 60% to MM and 40% to AA with AA’s capital as base. How much cash must MM invest to bring the partner's capital balances proportionate to their profit and loss ratio?

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Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 3.7EC

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1. As of July 1, 2020, MM and AA decided to form a partnership. Their balance sheets on this date are:

Cash P 15,000 P 38,000
Accounts Receivable 680,000 255,000
Allowance for doubtful accounts (140,000) (30,000)
Merchandise Inventory 202,000
Machinery and Equipment 150,000 270,000
Total P705,000 P735,000

Accounts Payable 135,000 240,000
MM, capital 570,000
AA, capital - 495,000
Total P705,000 P735,000

The partners agreed that the machinery and equipment of MM is under depreciated by P15,000 and that of AA by P45,000. Allowances for doubtful accounts is to be set up amounting to P120,000 for MM and P40,000 for AA. The partnership agreement provides for the profit and loss ratio and capital interest of 60% to MM and 40% to AA with AA’s capital as base. How much cash must MM invest to bring the partner's capital balances proportionate to their profit and loss ratio?

2. Z admits A as a partner in business. Accounts in the ledger for Z on November 20, 2018, just before the admission of A, show the following balances:
Cash P 6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Prepaid expense 1,000
Accounts Payable 9,000
Z, Capital 33,000

It is agreed that the purposes of establishing Z's interest the following adjustments shall be made:
a) An allowance for doubtful accounts of 3% of accounts receivable is to be established
b) The merchandise inventory is to be valued at P23,000.
c) Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.
A is to invest sufficient cash to obtain a 1/3 interest in the partnership.

Question 1: Z's adjusted capital before the admission of A is?

Question 2: The amount cash investment by A is?

Z admits A as a partner in business. Accounts in the ledger for Z on November 20, 2018, just before the
admission of A, show the following balances:
P 6,800
14,200
20,000
1,000
9,000
33,000
Cash
Accounts Receivable
Merchandise Inventory
Prepaid expense
Accounts Payable
Z, Сapital
It is agreed that the purposes of establishing Z's interest the following adjustments shall be made:
a) An allowance for doubtful accounts of 3% of accounts receivable is to be established
b) The merchandise inventory is to be valued at P23,000.
c) Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.
A is to invest sufficient cash to obtain a 1/3 interest in the partnership.
(1) Z's adjusted capital before the admission of A; and (2) the amount cash investment by A:

MM
AA
P 15,000
680,000
(140,000)
Р 38,000
255,000
(30,000)
202,000
270,000
P735,000
Cash
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Machinery and Equipment
150,000
Total
P705,000
Accounts Payable
ММ, саpital
АА, саpital
Total
135,000
570,000
240,000
495,000
P735,000
P705,000
The partners agreed that the machinery and equipment of MM is under depreciated by P15,000 and that of
AA by P45,000. Allowances for doubtful accounts is to be set up amounting to P120,000 for MM and
P40,000 for AA. The partnership agreement provides for the profit and loss ratio and capital interest of
60% to MM and 40% to AA with AA's capital as base. How much cash must MM invest to bring the
partner's capital balances proportionate to their profit and loss ratio?

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