Practical Accounting 2 Straight Problem No. 7

We will use the previous quiz to solve this problem:


Transactions for Sugarpop Partnership during the year 2019 are as follows:

  1. It was agreed by the partners that additional P10,500 representing provision for uncollectible accounts be recognized.
  2. Total advances to employees amounting to P22,500 were collected thru salary deductions.
  3. Agreed amount on inventories was P55,200. This is considered a valuation of inventory between cost and net realizable value.
  4. Office supplies used amounted to P6,000. Meanwhile, prepaid rent is to be accounted according to the partners’ policy.
  5. Depreciation for building and equipment was calculated as P142,800 and P33,200 respectively.
  6. Checks paid to various suppliers amounted to P150,000. Also, portion of notes payable was settled for P55,000.

On December 31, 2019, the partners agreed to admit Rita as a partner in the firm. Assets shall be revalued upward by P70,000 before her admission. Increase of assets attributable to each partner are as follows:

  1. Renzo: P26,533.37
  2. Pocholo: P10,696.52
  3. Vanessa: P14,908.68
  4. Julie Ann: P17,861.43

Such increase shall be debited to account “Other Non-current Assets.”

Rita is to purchase 25% of each capital of existing partners for P3,500,000. Respective revised Capital and P/L ratios for Renzo, Pocholo, Vanessa, and Julie Ann are 25%, 20%, 15%, and 15%.

Sales for the whole year amounted to P3,991,500, and cost of sales amounted to P41,400.

Distribution of profits shall be as follows:

  1. Salaries per month: Renzo, P2,400; Pocholo, P3,000; Vanessa, P3,780; Julie Ann, P3,600; Rita, P4,500.
  2. Interest on 10% of capital balances after Rita’s admission.
  3. Remainder is to be divided based on new P/L ratios.

Required:

  1. Adjusting entries before and after Rita’s admission.
  2. Partners’ capital before and after Rita’s admission.
  3. Income statement for December 31, 2019.
  4. Schedule of distribution of profits.
  5. How much shall be the personal gain/loss to be recognized by each partner? (Assume that the cash given to the partners is divided equally.)
Advertisements

Leave a Reply

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

WordPress.com Logo

You are commenting using your WordPress.com 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 )

Google+ photo

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

Connecting to %s