Peter has a bookstore called Peter Pan Bookstore which has been operating for 5 years.

On
March 1, 2019, Garcia invites him to put up a partnership. Peter agrees to close his business
and invest his net assets in the partnership. Garcia agrees to put up cash equal to half of the
contribution of Peter. The following are the assets and liabilities of the bookstore on March
1, 2019
Case 3: Investment of an Already Existing Business
Account Debit Credit
Cash 12000
Peter has
Accounts Receivable a bookstore called Peter
50000Pan Bookstore which has been operating for 5 years. On March 1
2019,
Allowance Garcia
for Bad Debtsinvites him to put up a partnership.5500 Peter agrees to close his business and invest his ne
assets
Merchandise in the partnership. Garcia
Inventory agrees to put up cash equal to half of the contribution of Peter.
25000
The following
Furniture & Fixtures are the assets and liabilities
10000 of the bookstore on March 1, 2019:
Accumulated Depreciation 2000
Accounts Payable Account 27000
Debit Credit
Pan, Capital Cash 62500 12,000
Totals P97,000
Accounts Receivable P97,000 50,000
Allowance for Bad Debts 5,500
Merchandise Inventory 25,000
The following Adjustments were considered:
Furniture & Fixtures 10,000
Accumulated Depreciation 2,000
1. The allowance for bad debts should be adjusted to 15% of the accounts receivable.
Accounts Payable 27,000
2. The furniture should be 25% depreciated.
Pan, Capital 62,500
3. Obsolete merchandise amounting to P3,000 should be written off.
4. Both partners will act as managing
Totalspartners and share profits and P97,000 P97,000
losses according to their capital contributions
The following Adjustments were considered:

1. The allowance for bad debts should be adjusted to 15% of the accounts receivable.
2. The furniture should be 25% depreciated.
3. Obsolete merchandise amounting to P3,000 should be written off.
4. Both partners will act as managing partners and share profits and losses according to their cap
contributions.

Let’s Solve
 Pan's Old Book
Particulars
Pan, Capital
ting for 5 years. On March 1, Allowance for Bad Debts
is business and invest his net
he contribution of Peter. Pan, Capital
2019: Accumulated Depreciation

Pan, Capital
Merchandise Inventory

5,500 Allowance for Bad Debts

Accumulated Depreciation
Accounts Payable
Pan, Capital
2,000
Cash
27,000
Accounts Receivable
62,500
Merchandise Inventory
P97,000
Furniture & Fixtures

ounts receivable. 1 Bad Debts Expense

Allowance for Bad Debts
(50000*15%)
osses according to their capital
Pan, Capital
Bad Debts Expense

2 (10000*25%)-2000 =

Pan, Capital -before adj.

Bad Debts
Depreciation
Merch writeoff
Pan, Capital - after adj
 New Partnership Books
Debit Credit Particulars Debit Credit
2,000 Cash 12,000
2,000 Accounts Receivable 50,000
Merchandise Inventory 22,000
500 Furniture & Fixtures 7,500
500 Allowance for Bad Debts 7,500
Accounts Payable 27,000
3,000 Pan, Capital 57,000
3,000

7,500 Cash 28,500

2,500 Garcia, Capital 28,500
27,000 (57000*50%)
57,000
12,000
50,000
22,000
10,000

2,000
2,000 Allowance for Bad Debts
5,500
2,000
2,000
2,000 7,500 7,500
-

500 Accumulated Depreciation

2,000
500

2,500 2,500
-

62,500
- 2,000
- 500
- 3,000
57,000
AR 50000
Less: Allow 7500
Net 42,500

Cost 10,000
Less: AD 2,500
Net book valu 7,500

67% Pan 57,000

33% Garcia 28,500
85,500

28,500

Assets
Cash 40,500
Accounts Receivable 50,000
Less: Allowance for Bad - 7,500
Merchandise Inventory 22,000
Furniture & Fixtures 7,500
total Asset 112,500

Liab & Capital

Accounts Payable 27,000
Pan, Capital 57,000
Lgarcia, Capital 28,500
total 112,500
Case 4: Both Partners invested their Current Business into the Partnership

Landa and Lopez, sole proprietors, operate a novelty shop each. After a year, Landa invited Lopez to
form a partnership. The following are their statement of financial positions as of January 2, 2019:
Landa Novelty Store Lopez Novelty Store
Statement of Financial Postion Statement of Financial Postion
As of January 2, 2019 As of January 2, 2019

Assets Assets

Cash 13,000 Cash 15,000

Accounts Receivable 10,000 Accounts Receivable P40,000

Allowance for Bad Debts (4,000) 36,000
Merchandise Inventory 20,000
Merchandise Inventory 50,000
Furniture & Fixtures 5,000
Furniture & Fixtures 15,000
Total P48,000
Accumulated Depreciation (1,500) 13,500
Total P114,500
Liabilities & Capital
Accounts Payable 12,500
Liabilities & Capital
Landa, Capital 35,000
Accounts Payable 15,000
Total P48,000
Notes Payable 20,000
Lopez, Capital 79,500
Total P114,500

The following provisions were agreed upon by the partners:

1. Landa will invest his business after the following adjustments:

a. P2,000 of the accounts receivable be written off.
b. The furniture will be adjusted to its fair market value of P4,000.
c. Accrued expenses of P2,500 be recognized.

2. Lopez should also adjust net assets by:

a. 15% of accounts receivable is estimated to be uncollectible.
b. Furniture should have a net book value of P12,000.

3. It was agreed that Landa and Lopez’s interest should be the same as their profit and loss ratio of
1:1. One of them must make an additional investment.

Let’s Solve It!

 Landa's Old Book
Particulars Debit
anda invited Lopez to Landa, Capital 2,000
f January 2, 2019: Accounts Receivable
30,000
stion Landa, Capital 1,000
Accumulated Depreciation
35500
15,000 Landa, Capital 2,500
,000 Accrued Expense
000) 36,000
50,000 Accounts Payable 12,500
,000 Landa, Capital 31,000
500) 13,500 Accrued Expense 2,500
P114,500 Accumulated Depreciation 1,000
Cash
Accounts Receivable
15,000 Merchandise Inventory
20,000 Furniture & Fixtures
79,500
P114,500

Lopez's Old Book

Particulars Debit
Lopez, Capital 2000
Allowance for Bad Debts

Lopez, Capital 1,500

Accumulated Depreciation

Accounts Payabl 15,000

Notes Payable 20,000
profit and loss ratio of Allowance for Bad Debts 6,000
Accumulated Depreciation 3,000
Lopez, Capital
Cash
Accounts Receivable
Merchandise Inventory
Furniture & Fixtures
 New Partnership books Book
Credit Particulars Debit Credit
Cash 13,000
2,000 Accounts Receivable 8,000
Merchandise Inventory 20,000
Furniture & Fixtures 4,000
1,000 Accounts Payable 12,500
Landa, Capital 30,000
Accrued Expense 2,500
2,500
Cash 15,000
Accounts Receivable 40,000
Merchandise Inventory 50,000
Furniture & Fixtures 12,000
Accounts Payabl 15,000
13,000 Notes Payable 20,000
8,000 Allowance for Bad Debts 6,000
20,000 Lopez, Capital 76,000
5,000
Cash 46,000
Landa, Capital 46,000

Credit

2,000 Cost 15,000

Less: AD 3,000
NBV 12,000
1,500

15,000
40,000
50,000
15,000
Assets
Cash 74,000
Accounts Receivable 48,000
Less: Allowance - 6,000
Merchandise Inventory 70,000
Furniture & Fixtures 16,000
Total 202,000

Accounts Payable 27,500

NotesPayable 20000
Accrued Expense 2500
Landa, Capital 76,000
Lopez, Capital 76000
202,000
 Opening the books of the Partn

Case 2: Contribution of Property with an Attached Liability

Example Problem:

Gogola and Paglinawan have just formed a partnership. Gogola contributed cash of P1,260,000 a
computer equipment that cost P540,000. The fair value of the computer is P360,000. Gogola has
payable on the computer of P120,000 to be assumed by the partnership. Gogolais to have a 60%
interest in the partnership. Paglinawan contributed only P900,000. The partners agreed to share
and loss equally.

Gogola should make and additional investment(withdrawal)

 Opening the books of the Partnership Actual Agreed Excess
60% Gogola 1,500,000 1,350,000 150,000

Liability 40% Paglinawan

100%
900,000 900,000
2,400,000 2,250,000
Entries:
Cash 1,260,000
Comp. Equip 360,000
Notes Payable 120,000
Gogola, Capital 1,500,000
buted cash of P1,260,000 and
r is P360,000. Gogola has notes Cash 900,000
Paglinawan, Capital 900,000
p. Gogolais to have a 60% capital
partners agreed to share profit Gogola, Capital 150,000
Cash 150,000