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: 1. 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. 2. Machinery and equipment are over-depreciated by P5,000 and P8,000 for A and B, respectively. 3. 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. 4. 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: DESCRIPTION            A                         B Assets                  P120,000             P130,000 Liabilities                 50,000                 60,000 Assume that the partners agreed to account for the formation using the bonus approach, determine the amount of bonus.

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
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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:

1. 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.

2. Machinery and equipment are over-depreciated by P5,000 and P8,000 for A and B, respectively.

3. 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.

4. 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: DESCRIPTION                                   B

Assets                  P120,000             P130,000

Liabilities                 50,000                 60,000

Assume that the partners agreed to account for the formation using the bonus approach, determine the amount of bonus.

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