Reference no: EM132890480
Question I - FORMATION
Q1. Teddy, Bobbie, Alex, and Gabbie organized a partnership called Four Sisters. Their business is engaged in providing wedding services. Teddy and Bobbie contributed cash of P600,000 each. Alex contributed building which she inherited from her father three (3) years ago. For the transfer tax purposes, the value of the building was P900,000. A week before the partnership was formed, several buyers signify their intention of buying the building for P920,000. The building has been subjected to a mortgage with a carrying amount of P200,000, which will be assumed by the partnership. Gabbie, being an event planner, contributed her skills and knowledge to the partnership. The partners agreed that Gabbie would be given a salary of P15,000. She will also receive 20% of the remaining profits.
a. What is the value of the building contributed by Alex? Justify your answer in no more than three (3) sentences.
b. Give the entry to be made at the date of formation
Q2. Cyril, Joseph, and Reggie formed a partnership named CJR Partnership Ltd. Cyril contributed cash of P150,000 and his store equipment that originally cost P160,000 with the second value of P125,000. Joseph will contribute P180,000 cash while Reggie, whose family sells computers, will contribute P250,000 cash and a brand-new computer that cost his family's computer dealership P150,000 but with a regular selling price of P160,000. They agreed to share profits and losses equally.
a. Assuming that you are hired as the new accountant of the new partnership, how will you record the contributions made by Cyril and Reggie? Justify your answer in no more than three (3) sentences.
b. Give the entry to be made at the date of formation.
Question II - OPERATION AND DISSOLUTION
Q1. Partners MM and LL have profit and loss agreement with the following provisions: salaries of P30,000 and P45,000 for MM and LL, respectively; a bonus to MM of 10% net income after salaries and bonus; and interest of 10% on average capital balances of P20,000 and P35,000 for MM and LL, respectively. One-third of any remaining profits will be allocated to MM and the balance to LL. If the partnership had a net income of P104,500,
How much should be allocated to MM, assuming the provisions of the profit and loss agreement are ranked by order of priority, starting with salaries?
Q2. Renalie and Ben are partners who share profits and losses in the ratio of 6:4, respectively. On June 1, 20X2, their respective capital accounts were as follows:
Renalie - P60,000
Ben - P50,000
On the same date, Jeremiah was admitted as a partner with 1/5 interest in capital and profits for an investment of P40,000.
What is the capital of Ben after Jeremiah's admission if the partnership began with a total capital of:
a. P150,000
b. P200,000
Question III - LIQUIDATION
Q1. Partners Gaylee, Jandra, and Debby have capital balances of P50,000, P90,000, P20,000, respectively. They split profits in the ratio of 4:4:2, respectively.
Under a safe cash distribution plan, who among the partners will get the first distribution? Justify your answer by showing your solution.
Q2. The following condensed balance sheet is presented for the partnership of Joseph and Emman, who share profits and losses in the ratio of 60:40, respectively:
Other Assets P500,000
Emman, loan 20,000
Total P520,000
Accounts Payable P120,000
Joseph, Capital 220,000
Emman, Capital 180,000
Total P520,000
The partners decided to liquidate the partnership. If the assets are sold for P345,000,
What amount of the available cash should be distributed to Emman? Show your solution.