Reference no: EM132899396

Question - On January 1, 2021, XX and ZZ agreed to form a partnership. The partner's contributions are listed below

SPECIAL TRANSACTIONS XX ZZ

Cash 50,000 120,000

Account receivable 360,000 1,080,000

Inventories 216,000 360,000

Land 1,080,000

Building 900,000

Equipment 90,000 90,000

Accounts Payable 336,000 450,000

Capital 1,460,000 2,100,000

The partners agreed to the following:

a. The recoverable amounts of the partner's respective accounts receivable are P300,000 and P760,000 for XX and ZZ, respectively

b. The inventory contributed by ZZ includes obsolete items with a recorded cost of P20,000

c. The land contributed by XX has an attached mortgage of P180,000. The partnership shall assume the mortgage.

d. The equipment contributed by ZZ has a fair value of P130,000.

e. XX has an unrecorded accounts payable of P100,000. The partnership assumes the obligations of settling the account.

Requirements -

1. Compute for the adjusted capital balances of the partners.

2. Prepare the balance sheet after the partnership formation.