Reference no: EM132850346

Questions -

Q1) Sunny and Gloomy contributed the following in the formation of a partnership business:

Sunny Gloomy

Cash 180,000

Accounts Receivale 100,000

Inventory 160,000

Land (at historical cost) 340,000

Total 440,000 340,000

Additional information:

Only 60% of the accounts receivable is recoverable.

The net realizable value of the inventory is 120,000. Sunny acquired the inventory on account; the partnership will assume the unpaid balance of 60,000.

The land has fair value of 600,000

Requirement - Compute for the adjusted balances of the partners capital accounts. Provide the Journal entry.

Q2) Use the information in problem 1. Sunny and Gloomy agreed to share in profits and losses based on a 30:70 ratio. A partner with deficient contribution shall provide additional cash in order for his capital balance to reflect his profit and losses sharing ratio.

Requirement - Provide the entry to record the additional investment of the partner with deficient contribution.

Q3) Sunny and Gloomy agreed to have equal credits to their capital accounts. The bonus method shall be used.

Requirement -

A. Provide the compound journal entry

B. Provide the simple journal entries

Q4) Sunny and Gloomy agreed to have equal credits to their capital accounts. Cash settlement is to be made between the partners for the adjustments on their capital balances.

Requirement - Describe how the cash settlement should be made and how it would be accounted for in the partnership books.

5) Sunny and Gloomy agreed to have equal credits to their capital accounts. Additional investment or partial withdrawal shall be made by a partner from the partnership for any adjustment to his capital balances.

Requirement - Which partner should make an additional investment and which partner should make a withdrawal?