Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partn
Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partn
Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partn
Chapter 3 – Partnership Operation (Division of Profit or Loss) Bruce and Rachel agree to form a partnership on July 1, 2020. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce’s assets and liabilities are given below. Book value Agreed value Accounts receivable P 32,000 P 30,000 Inventory 240,000 138,000 Equipment 322,000 240,000 Accounts payable 200,000 200,000 Notes payable 14,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership. The partners have agreed on the following: 1. Capital accounts will remain fixed 2. 12% interest profit computed on capital 3. Salaries of P30,000 each for 2020 but will be twice this amount next year and thereafter; 4. 10% interest charge on partners’ drawings made beyond the agreed salaries; and 5. Remaining profits are to be shared equally. Direction: a. Set up the general ledger (T Accounts) accounts to each partner’s equity. b. Prepare a statement of changes in partners’ equity. Additional information and requirements: The following year, 2021, the business earned P250,000 before tax with cash withdrawn by the partners as follows: P50,000 by Bruce and P60,000 by Rachel. Direction: a. Prepare a profit distribution table and one entry to record the distribution. b. Set up the general ledger (T Accounts) accounts to each partner’s equity. c. Prepare a statement of changes in partners’ equity.
Transcribed Image Text:Chapter 3 – Partnership Operation (Division of Profit or Loss)
Bruce and Rachel agree to form a partnership on July 1, 2020. Bruce, who has been trading as a
sole proprietor, will invest certain business assets at agreed valuations, transfer his business
liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the
new business. Details of Bruce's assets and liabilities are given below.
Agreed value
P 30,000
Book value
Accounts receivable
Inventory
Equipment
Accounts payable
Notes payable
P 32,000
240,000
322,000
200,000
14,000
138,000
240,000
200,000
14,000
Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40%
interest in the partnership.
The partners have agreed on the following:
1. Capital accounts will remain fixed
2. 12% interest profit computed on capital
3. Salaries of P30,000 each for 2020 but will be twice this amount next year and thereafter;
4. 10% interest charge on partners' drawings made beyond the agreed salaries; and
5. Remaining profits are to be shared equally.
Definition Definition Amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item
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