Allyson Charissa T.

Ansay
BSA – 2
Accounting in special transactions

Problems
1. AAA, BBB and CCC agreed to form a partnership to be known as ABC
Partnership. What are the entries in the partnership books under different
assumptions?
a. Each partner invested cash of P100,000 for an equal interest in the
partnership.

Cash P300,000

AAA, Capital P100,000

BBB, Capital P100,000

CCC, Capital P100,000

Cash investment of each partner

b. AAA contributed cash of P150,000 and inventories costing P130,000 and with
agreed values of P150,000. BBB contributed cash of P200,000. CCC
contributed equipment costing P170,000 with accumulated depreciation of
P25,000 and agreed value of P150,000.

Cash P150,000

Inventory 150,000

AAA, Capital P300,000

Contributed Cash and inventory of AAA

 Cash 200,000

BBB, Capital 200,000

Contributed cash of BBB

Equipment 150,000

CCC, Capital 150,000

Contributed Equipment of CCC

c. AAA contributed cash of P100,000; Accounts Receivable of P150,000 with

Allowance for Doubtful Accounts of P50,000. BBB contributed equipment
valued at P400,000 while CCC is an industrial partner to contribute his special
skills and talents to the partnership.

Cash P100,000

Accounts Receivable 100,000

AAA, Capital P200,000

Additional Contribution of AAA

Equipment 400,000

BBB, Capital 400,000

Additional contribution of BBB

Memo:

CCC is admitted as an industrial partner.

 2. DDD and FFF, both sole proprietors, agreed to form a partnership. Account
balances and the respective agreed values upon formation are:

DDD FFF
Per Books Agreed Per Books Agreed
Cash 150,000 150,000 140,000 140,000
Accounts Receivable 140,000 140,000 135,000 135,000
Allowance for Bad (50,000) (40,000) (30,000) (40,000)
Debts
Inventory 135,000 137,000 128,000 130,000
Equipment 300,000 150,000 200,000 175,000
Accumulated (60,000) 0 (20,000) 0
Depreciation
Accounts Payable 100,000 100,000 150,000 150,000

What are the entries in the partnership books under different assumptions?
a. The partners decided to use a new set of books.

Cash P290,000
Accounts Receivable 275,000
Inventory 267,000
Equipment 325,000
Allowance for bad debts P80,000
Accounts Payable 250,000
DDD, Capital 437,000
FFF, Capital 390,000
Investments

b. The partners decided to use the books of DDD.

Cash P150,000
 Accounts Receivable 140,000
Inventory 135,000
Equipment 300,000
Allowance for bad debts P50,000
Accumulated Depreciation 60,000
Accounts Payable 100,000
DDD, Capital 515,000
Investments of DDD

c. The partners decided to use the books of FFF.

Cash P140,000
Accounts Receivable 135,000
Inventory 128,000
Equipment 200,000
Allowance for bad debts P30,000
Accumulated Depreciation 20,000
Accounts Payable 150,000
DDD, Capital 420,000
Investments of FFF

3. GGG and HHH agreed to form a partnership. They initially agreed to divide the
initial partnership capital equally even though GGG contributed P500,000 while
HHH contributed P400,000 cash into the partnership. What are the entries to
record the transactions in the books of the partnership?

Cash P900,000
GGG, Capital P450,000
HHH, Capital 450,000
 Initial Investment of partners

4. On January 1, 2021, III and JJJ decided to combine their businesses and form a
partnership. Their balance sheet on this date were:

III JJJ
Cash 150,000 75,000
Accounts Receivable 375,000 250,000
Inventory 500,000 400,000
Furniture and Fixture 600,000 180,000
Office Equipment 230,000 50,000
Prepaid Expenses 12,750 6,000
Total Assets 1,867,750 961,000

Accounts Payable 900,000 360,000

Capital 967,750 601,000
Total Liabilities and Capital 1,867,750 961,000

The parties also agreed to have the following adjustments:

• Provide 5% allowance for doubtful accounts on each Accounts Receivable.
• Inventories should be recognized only at 80% of their book values.
• Furniture and Fixture of III is overvalued by P25,000 while the Office
Equipment of JJJ is overvalued by P11,500.
• Prepaid Expenses of P6,000 for III and P2,000 for JJJ is to be recognized.
• Accrued Expenses of P3,000 for III and P1,000 for JJJ is to be recorded.

Account Title DR CR
1. III, Capital P 18,750
Allowance for bad debts P 18,750
Adjustments

2. III, Capital (500,000 x 80% = 400,000 100,000

500,000 – 400,000 = 100,000)
Inventory 100,000
 Adjustments

3. III, Capital 25,000

Furniture and Fixtures 25,000
Adjustments

4. Prepaid Expenses 6,000

III, Capital 6,000
Adjustments

5. Accounts Payable 3,000

Cash 3,000
Adjustments

Account Title DR CR
1. JJJ, Capital P 12,500
Allowance for bad debts P 12,500
Adjustments

2. JJJ, Capital (400,000 x 80% = 320,000 80,000

400,000 – 320,000 = 80,000)
Inventory 80,000
Adjustments

3. JJJ, Capital 11,500

Office Equipment 11,500
Adjustments

4. Prepaid Expenses 2,000

JJJ, Capital 2,000
Adjustments

5. Accounts Payable 1,000

Cash 1,000
Adjustments

Balances after revaluation

III JJJ
Cash 147,000 74,000
Accounts Receivable 375,000 250,000
Inventory 400,000 320,000
 Furniture and Fixture 575,000 180,000
Office Equipment 230,000 38,500
Prepaid Expenses 18,750 8,000
Total Assets 1,745,750 870,500

Allowance for bad debts 18,750 12,500

Accounts Payable 897,000 359,000
Capital 830,000 499,000
Total Liabilities and Capital 1,745,750 870,500
Determine the following:
a. Entries to record the formation in the books of the partnership (assuming the
partners decided to use a new set of books)

Cash P225,000
Accounts Receivable 625,000
Inventory 900,000
Furniture and Fixture 780,000
Office Equipment 280,000
Prepaid Expenses 18,750
Accounts Payable P1,260,000
III, Capital 967,750
JJJ, Capital 601,000
Investments

b. Total Assets after formation

Cash P225,000
Accounts Receivable 625,000
Inventory 900,000
Furniture and Fixture 780,000
Office Equipment 280,000
Prepaid Expenses 18,750
Total Assets P2,828,750
 c. Total Liabilities after formation
Accounts Payable, III P900,000
Accounts Payable, JJJ 360,000
Total Liabilities P1,260,000

d. Capital Contribution and Capital Credit of III

III, Capital P967,750

e. Capital Contribution and Capital Credit of JJJ

JJJ, Capital P601,000

5. Use the same information in Number 4 except the parties agreed that JJJ will
make additional cash investment to give her 50% interest in the firm, after
making the adjustments. Determine the following:
a. Entries to record the formation in the books of the partnership (assuming
the partners decided to use a new set of books)

Cash P258,000
Accounts Receivable 625,000
Inventory 720,000
Furniture and Fixture 755,000
Office Equipment 268,500
Prepaid Expenses 26,750
Allowance for bad debts P31,250
Accounts Payable 1,256,000
III, Capital 830,000
JJJ, Capital 536,000
Investments
b. Total Assets after formation
Cash P258,000
Accounts Receivable 625,000
Inventory 720,000
Furniture and Fixture 755,000
Office Equipment 268,500
Prepaid Expenses 26,750
Total Assets P2,653,250

c. Total Liabilities after formation

Accounts Payable, III P897,000
Accounts Payable, JJJ 359,000
Total Liabilities P1,256,000

d. Capital Contribution and Capital Credit of III

III, Capital P830,000

e. Capital Contribution and Capital Credit of JJJ

JJJ, Capital P536,000