Question

Problem 2 Proprietor to be Used by the Partnership) 4 (Cash, Non-cash and Net Assets Contributions; Books of the Sole On January 1, 2014, Abante, Arevalo, and Almonte decided to form a partnership. Abante, a sole proprietor, will transfer to the partnership his net assets, excluding cash. Arevalo will contribute cash in an amount equal to one and a half times the investment of Abante. Almonte will contribute a piece of land with an agreed value of P1,800,000 subject to a mortgage of P300,000 to be assumed by the partnership. The statement of financial position of Abante is as shown on the next page.

Answer 1

Journal entries in the books of Abante, Arevalo and Almonte Debit Amount Credit Amount 840,000 1,200,000 1,050,000 Date Particulars 2014 Account receivable A/C Merchandise inventory A/C Furniture and equipment A/C To Allowance for uncollectible Accounts A/C To Accumulated depreciation A/C To Accounts Payable A/C To Abante's Capital A/C (Being capital introduced by Abante in new partnership firm) 90,000 210,000 450,000 2,340,000 Dr. 1,170,000 Cash A/C To Arevalo's Capital A/C (Being cash introduced as capital by Arevalo) 1,170,000 Jan 1. Dr 1,800,000 Land A/C To Loan from Almonte A/C To Almonte's Capital A/C (Being land brought as capital by Alomnte) 300,000 1,500,000 Jan 1. Dr 150,000 Revaluation A/c To Allowance for uncollectible Accounts A/C (Being allowance increased) 150,000 Jan 1. Dr 200,000 Revaluation A/C To Merchandise inventory A/C (Being inventory revalued) 200,000 Jan 1. Dr. 240,000 Revaluation A/C To Furniture andequipment A/c (Being depreciation charged on furniture) 240,000 Jan 1. 196,667 196,667 196,666 Abante's Capital A/C Arevalo's Capital A/C Almonte's Capital A/C To Revaluation A/C (Being loss on revaluation of assets distributed among partners) 590,000 Jan 1. Dr 143,333 Goodwill A/C To Abante's Capital A/C (Being Abante's capital adjusted as goodwill) 143,333