Reference no: EM132584453
Nikki, EJ and Justin decided to form a partnership contributing the following from each of their existing businesses:
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Nikki
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EJ
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Justin
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Cash
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50,000
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75.000
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55,000
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Receivables
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100,000
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50.000
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60,000
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Allowance for Bad Debts
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2,500
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5,000
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3,000
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Inventories
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100.000
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55,000
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Property, Plant and Equipment
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350,000
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Goodwill
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50.000
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Liabilities
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200,000
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45,000
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The partners agree on the following:
a) The receivables of each partner is to have a 95% net realizable value.
b) Inventories of Nikki costing P10,000 are deemed to be worthless.
c) The property, plant and equipment has a current value of P400,000 and is subject to a P200,000 mortgage (the liability of EJ). The partners agree to shoulder 34 of the loan plus accrued interest (based on the original loan balance) at 10% for one year.
d) Liabilities of Justin are understated by P5,000.
e) The only goodwill recognized is the goodwill attributable to EJ, which is equivalent to 5% of his adjusted capital.
f) The partners are to share in the ratio of 4:5:1 to Nikki, EJ and Justin, respectively.
g) The partners are to invest or withdraw additional cash to make their capital balances equal to their profit and loss ratios with EJ's capital to be used as the basis.
Question 1: Determine the total Capital of the new partnership.
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