Practical Accounting 2 Straight Problem No. 5

If you have answered the previous problems, congratulations! This time, we will test our understanding on accounting transactions that may be applied to partnerships. Our answers from previous problems will be needed in answering this next quiz. Solve this problem:


The following transactions happened during the year 2018:

  1. Accounts receivable of P12,800 were collected. Furthermore, the partners decided that P15,000 should be written off as it is uncollectible. Use direct write-off method in this case.
  2. The value of the land was revalued upward by P74,000. Meanwhile, depreciation expense for the building appropriately computed as P102,600 were not yet recorded after the formation of the partnership.
  3. Checks amounting to P151,000 were given to various suppliers, and the P45,000 portion of notes payable were paid.
  4. The partnership had gave P55,000 as loan to Vanessa.
  5. Renzo had gave P120,000 to the partnership. They classified this transaction as a long-term obligation.

On April 1, 2018, Julie Ann was admitted into the partnership. Her investment of cash totalling P4,800,000 represents the fair value of her 40% interest in capital and profits. Any revaluation shall be an addition to “Other Non-current Assets” account.

(Hint: Revised respective Capital and P/L ratios after Julie Ann’s admission will be 25%, 17%, 18%, and 40%, respectively for Renzo, Pocholo, Vanessa, and Julie Ann.)

Requirement:

  1. Adjusting entries before Julie Ann’s admission.
  2. Partners’ capital before and after her admission.
  3. Adjusting entries after Julie Ann’s admission.
  4. Statement of financial position as of April 1, 2018.

P2 Problem prepared by: TweetNewscaster


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

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