Question

On May 1, 2019 the business assets of Gerwin and Alvin appear below: Gerwin Cash 11,000 Accounts Receivable 234,536 Inventories 120,035 Land 603,000 Building Furniture & Fixture 50,345 Other Assets 2,000 Total 1,020,916 Alvin 22,354 567,890 260,102 428,267 34,789 3,600 1,317,002 Accounts Payable Notes Payable Gerwin, Capital Alvin, Capital Total 178,940 200,000 641,976 243,650 345,000 1,020,916 728,352 1,317,002 Gerwin and Alvin agreed to form a partnership contributing their respective assets and equities subject to the following adjustments: Accounts receivables of P20,000 in Gerwin's book and P35,000 in Alvin's book are uncollectible. Inventories of P5,500 and P6,700 are worthless in Gerwin and Alvin's respective book. • Other assets of P2,000 and P3,600 in Gerwin and Alvin's respective books are to be written off. 5. The capital accounts of the partners after the adjustments will be: Gerwin Alvin a. 613,576 683,350 b. 640,876 712,345 c. 615,942 717,894 d. 614,476 683,052 6. How much assets does the partnership have? a. 2,337,918 b. 2,237,918 c. 2,265,118 d. 2,365,218 7. Dave offered to join for a 20% interest in the firm. How much cash should be contributed? a. 324,382 b. 330,870 c. 344,237 d. 337,487 8. After Dave's admission, the profit and loss sharing ratio was agreed to be 4:4:2, based on capital credits. How much should cash settlement be between Gerwin and Alvin? a. 33,602 b. 32,930 c. 32,272 d. 34,288

Answer 1

BALANCESHEET AFTER MAKING ALL THE THREE ADJUSTMENTS ARE AS FOLLOWS-

	BALANCE SHEET
CAPITAL & LIABILITIES	GERWIN	ALVIN	ASSETS	GERWIN	ALVIN
ACCOUNT PAYABLES	178,940	243,650	CASH	11,000	22,354
NOTES PAYABLES	200,000	345,000	ACCOUNT RECEIVABLES	214,536	532,890
CAPITAL	614,476	683,052	INVENTORIES	114,535	253,402
			LAND	603,000
			BUILDING		428,267
			FURNITURE & FIXTURE	50,345	34,789
			OTHER ASSETS
TOTAL	993,416	1,271,702	TOTAL	993416	1271702

QUESTION 05

CAPITALS OF PARTNERS AFTER ADJUSTMENTS WILL BE

GERWIN'S CAPITAL = 614,476

ALVIN'S CAPITAL     = 683,052

SO OPTION NO D IS CORRECT.

QUESTION 06

ASSETS OF PARTNERSHIP = ASSETS OF GERWIN + ASSETS OF ALVIN

                                               = 993,416 + 127,1702 = 2,265,118

SO OPTION NO C IS CORRECT.

QUESTION 07

FOR 80% INTEREST IN PARTNERSHIP CAPITAL OF BOTH GERWIN & ALVIN = 614,476 + 683,052 = 1,297,528

SO FOR 20% INTEREST IN PARTNERSHIP DAVE HAS TO BOUGHT = 1,297,528 * 20 / 80

                                                                                                                   =324,382

SO OPTION NO A IS CORRECT.

QUESTION 08

FOR 2 PART INTEREST CAPITAL OF DAVE = 324,382

HERE BOTH GERWIN & ALVIN HAS 4 PARTS EACH THEIR CAPITAL SHOULD BE = 324,382* 2 = 648,764

NOW DEFICIENCY IN GERWIN CAPITAL = 648,764 - 614,476 = 34,288

NOW EFFICEIENCY IN ALVIN CAPITAL    = 683,052- 648,764 = 34,288

SO THERE IS A CASH SETTLEMENT OF 34,288 BETWEEN GERWIN & ALVIN

SO OPTION NO D IS CORRECT.