Practical Accounting 2 Straight Problem No. 2

This problem focuses more on the partnership formation. Also, this problem is drafted with succeeding problems as discussed in the partnership topic. So this problem will not end only on this article, but will cover succeeding articles.

Solve the following comprehensive problem.

On September 1, 2016, Renzo and Pocholo decided to combine their respective sole proprietorships to form Sugarpop Partnership. Their separate statements of financial position were submitted to you:

Renzo Pocholo
Cash 57,000.00 85,900.00
Accounts Receivable 48,600.00 87,200.00
Allowance for Doubtful Accounts (2,000.00)
Advances to Officers and Employees 10,400.00 13,500.00
Inventory 22,400.00 31,400.00
Land, net 1,426,000.00 1,100,000.00
Building, net 684,600.00 1,427,000.00
Equipment, net 130,000.00
TOTAL ASSETS 2,377,000.00 2,745,000.00
Accounts Payable 447,000.00 184,000.00
Notes Payable 420,000.00 35,000.00
Mortgage Payable 350,000.00
Renzo, Capital 900,000.00
Pocholo, Capital 1,300,000.00
Income/Loss Summary 610,000.00 876,000.00
TOTAL LIABILITIES AND EQUITY 2,377,000.00 2,745,000.00

The following adjustments were considered:

  1. Accounts receivable for Renzo had been estimated net of P2,000 allowance for doubtful accounts, and that of Pocholo P4,500 had been reasonably determined to be uncollectible.
  2. Renzo’s sales collected in advance amounting to P25,000 had not yet been recorded in the books.
  3. Advances to officers and employees in Renzo’s books had been understated by P9,000.
  4. Pocholo’s books had shown a P15,000 overstatement in inventory while in Renzo’s it showed P24,000 understatement in inventory.
  5. Pocholo had recently purchased a prepaid insurance worth P65,000 for the new partnership. This was purchased at the time the parties had not yet contemplated this adjustment.
  6. The partners had paid an advance rent for P18,000. This has been shouldered by them equally and will run for five years.
  7. Renzo’s building is secured by a notes payable of P420,000. He will assume only the P120,000 portion of the liability.
  8. The land has an attached mortgage payable of P350,000. Pocholo did not assume the liability.
  9. Unused supplies charged to Renzo’s expense account amounted to P7,800.
  10. Renzo shall invest/divest cash to reflect his 60% share in the total capital.

Determine the following:

  1. Adjusting entries
  2. Total contributed capital of the partners
  3. Total agreed capital of the partners
  4. Total assets, liabilities, and capital of the new partnership

NOTE: We will use the answers in this problem for our succeeding article. Keep the answers for future reference.

P2 Problem prepared by: TweetNewscaster

Featured Image Credit: Audit Firm Visit photo from St. Scholastica College site. For illustrative purposes only.


2 thoughts on “Practical Accounting 2 Straight Problem No. 2

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s