On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the business assets and assume liabilities. Partners capitals are to be based on net assets transferred after the following adjustments.The partners agreed to the following adjustments:A’s inventory is to be increased by P15,000, while B’s inventory has a current fair market value of P100,000 and an agreed value of P110,000. B’s unadjusted inventory amounted to P90,000.Machinery and equipment are over-depreciated by P5,000 and P8,000 for A and B, respectively.Furnitures and fixtures for partner A has a current fair market value of P60,000 and an agreed value of P50,000. Furnitures and fixtures is carried at its cost amounting to P100,000 with accumulated depreciation of P45,000.Accrued rent income of P10,000 for A, and accrued salaries of P5,000 for B should be recognized on their respective books.The individual trial balances on October 1, before adjustments, follow:DESCRIPTIONABAssetsP120,000P130,000Liabilities50,00060,000 Assume that the partners agreed to account for the formation using the bonus approach, determine the amount of bonus.

Bonus method is applied in the event of admission of a partner or formation of a new partnership.…

Answered: On October 1, A and B pooled their…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 4PB

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Question

On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the business assets and assume liabilities. Partners capitals are to be based on net assets transferred after the following adjustments.

The partners agreed to the following adjustments:

A’s inventory is to be increased by P15,000, while B’s inventory has a current fair market value of P100,000 and an agreed value of P110,000. B’s unadjusted inventory amounted to P90,000.
Machinery and equipment are over-depreciated by P5,000 and P8,000 for A and B, respectively.
Furnitures and fixtures for partner A has a current fair market value of P60,000 and an agreed value of P50,000. Furnitures and fixtures is carried at its cost amounting to P100,000 with accumulated depreciation of P45,000.
Accrued rent income of P10,000 for A, and accrued salaries of P5,000 for B should be recognized on their respective books.

The individual trial balances on October 1, before adjustments, follow: