Problem: Formation Melai admits Nora as a partner in business. Just before the partnership's formation, Melai's books showed the following: Cash 2,600 Accounts Receivable 12,000 18,000 Merchandise Inventory Accounts Payable Melai, Capital 6,200 26,400 It was agreed that, for purposes of establishing Melai's investment in the firm, the following adjustments shall be reflected: > Allowance for bad debts of 2% should be set up. > Merchandise Inventory should be valued at P20,200. > Prepaid Expenses of P350 and accrued expenses of P400 should be recognized.

Problem: Formation Melai admits Nora as a partner in business. Just before the partnership's formation, Melai's books showed the following: Cash 2,600 Accounts Receivable 12,000 18,000 Merchandise Inventory Accounts Payable Melai, Capital 6,200 26,400 It was agreed that, for purposes of establishing Melai's investment in the firm, the following adjustments shall be reflected: > Allowance for bad debts of 2% should be set up. > Merchandise Inventory should be valued at P20,200. > Prepaid Expenses of P350 and accrued expenses of P400 should be recognized.

Accounting

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 12.1APR

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LO.2 In the current year, Bill Parker (54 Oak Drive, St. Paul, MN 55164) is considering making an investment of 60,000 in Best Choice Partnership. The prospectus provided by Bills financial planner indicates that the partnership investment is not a passive activity and that Bills share of the entitys loss in the current year will likely be 40,000, whereas his share of the partnership loss next year will probably be 25,000. Write a letter to Bill in which you indicate how the losses would be treated for tax purposes in the current year and the following year.
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