SAMPLE ACTIVITY
[Link] with no existing business form a partnership
On May 1, 2025, Karla Johnson and Eduardo Smith agreed to a partnership. The partnership
agreement specified that Karla is to Invest P1,000,000.00 and Eduardo is to contribute Land with
a Fair Value P2,000,000.00 with a P500,000.00 mortgage payable to be assumed by the
partnership. They agreed share profit and Losses equally.
Required:
1. Journal entries to record the partnership formation.
2. Prepare Statements of Financial Position after partnership.
2. A sole proprietor and individual without existing business form a partnership
The statement of Financial Position of Edsel Dolo on March 1, 2025 before accepting Joreen
Chu as a partner shown as follows:
EDSEL ENTERPRISE
Statement of Financial Position
March 1, 2025
Cash 150,000.00
Accounts Receivable 280,000.00
Less: Allowance for bad debts 50,000.00 230,000.00
Inventory 180,000.00
Land 300,000.00
Building 600,000.00
Less: Accumulated Depreciation
- Building 60,000.00 540,000.00
Total Asset 1,400,000.00
Accounts Payable 250,000.00
Notes Payable 140,000.00
Edsel, Capital 1,010,000.00
Total Liabilities and Owner's Equity 1,400,000.00
Joreen offered to invest cash to get a capital credit equal to on-half of Edsel capital after giving
effect to the adjustments as follows:
a. The inventory is to be valued at P150,000.00
b. The accounts receivable is estimated to be 90% collectible
c. Interest on notes payable will be recognized. The note is dated January 1, 2025 with 12%
annual interest
d. Land will be revalued at 500,000.00
e. Building is to be valued at 480,000.00
f. Office supplies on hand that have been charge to expense in the past amounted to 15,000.00.
This will be used by the partnership
Required:
1. Journal entries to record the partnership formation.
2. Prepare Statements of Financial Position after partnership.
3. Two or more sole proprietorship business form a partnership
On July 1, 2025, Edsel and Joreen decided to combine their businesses into a partnership. The
business assets and liabilities of the partners are as follows:
Statement of Financial Position
July 1, 2025
Account Edsel Joreen
Cash 25,000 35,000
Accounts Receivable 14,000 20,000
Inventories 45,000 30,000
Store Equipment 18,000 22,000
Transportation
25,000 20,000
Equipment
Other Assets 10,000 5,000
Accounts Payable 38,000 48,000
Notes Payable 12,000 18,000
Additional information:
1. The partners agreed to contribute all business assets except for the transportation equipment of
Edsel.
2. All liabilities are to be assumed by the partnership except for the notes payable of Joreen,
which she will settle using personal assets.
3. Before forming the partnership, the following adjustments were agreed upon:
a. An allowance for doubtful accounts amounting to 5% of accounts receivable shall be set
up for each partner.
b. 10,000 of Edsel's inventories were found to be obsolete, while Joreen's inventories are to
be revalued at 35,000.
c. Joreen's store equipment is under depreciated by 2,000
d. Other assets in both books are to be fully written off.
e. Prepaid expenses of P2,000 and accrued expenses of 1,200 shall be recognized in Edsel
books
Required:
1. Journal entries to record the partnership formation.
2. Prepare Statements of Financial Position after partnership.
3. How much is the adjusted capital of Edsel upon formation of the partnership?
4. How much is the adjusted capital of Joreen upon formation of the partnership?