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6 activity 1

6 activity 1

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6_Activity_1:

Investment of Partners:

1. If the capital of each partner is based on his/her contributions, give the entry to record

the partnership formation.

Cash 55,000

Furniture 44,000

Equipment 165,000

Para, Capital (55,000 + 44,000) 99,000

Luman, Capital 165,000

2. If the partners agree that their capital should be equal so that the partner with the lower

capital will make additional cash investment, who will make the investment and how

much?

Para, Capital 99,000

Luman, Capital 165,000

(165,000 – 99,000 = 66,000)

Para will make an additional investment of 66,000.

3. Assuming that Luman’s agreed capital is 275,000, how much cash investment must he

make?

Agreed capital – Original capital

(275,000 – 165,000 = 110,000)

Original Capital of Luman is 165,000 which is the equipment contribution. Since, the

agreed capital of Luman is 275,000, he will contribute cash amounting of 110,000.

4. Assuming that Para’s investment is equal to 30% of the total capital, how much

additional investment should Luman make?

Para, Capital is 99,000 which is equal to 30%. So, the total capital of Para is 330,000.

(99,000/30%=330,000)

Luman, Capital is 70% of the total capital. So, the 70% of 330,000 is 231,000, less 165,000

(Luman already contributed) is equal to 66,000.

(330,000 x 70% = 231,000 – 165,000 = 66,000)

Luman should make an additional investment of 66,000.

Partnership Formation:

1. Ten percent (10%) bad debts (impairment loss) should be provided on the

outstanding accounts receivable.

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Bobby, Capital 6,300

Allowance for impairment loss (63,000 x 10%) 6,300

Cobby, Capital 10,500

Allowance for impairment loss (105,000 x 10%) 10,500

2. The market value of the inventory is 80% of cost.

Bobby, Capital 31,500

Inventory (157,500 x 20%) 31,500

Cobby, Capital 10,500

Inventory (52,500 x 20%) 10,500

3. The carrying amount of the equipment is only 33,600.

Cobby, Capital 8,400

Accumulated depreciation (42,000 – 33,600) 8,400

4. Bobby will recognize prepaid expenses of 8,400.

Prepaid expense 8,400

Bobby, Capital 8,400

5. Cobby will recognize accrued expenses of 6,825.

Cobby, Capital 6,825

Accrued expense 6,825

A. Book of Bobby will be used

Adjusting Entries

Bobby, Capital 6,300

Allowance for impairment loss 6,300

Bobby, Capital 31,500

Inventory 31,500

Prepaid expense 8,400

Bobby, Capital 8,400

To record the assets, liabilities and capital of Cobby in the book of Bobby.

Cash 126,000

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6_Activity_1: Investment of Partners: 1. If the capital of each partner is based on his/her contributions, give the entry to record the partnership formation. Cash 55,000 Furniture 44,000 Equipment 165,000 Para, Capital (55,000 + 44,000) 99,000 Luman, Capital 165,000 2. If the partners agree that their capital should be equal so that the partner with the lower capital will make additional cash investment, who will make the investment and how much? Para, Capital 99,000 Luman, Capital 165,000 (165,000 – 99,000 = 66,000) Para will make an additional investment of 66,000. 3. Assuming that Luman’s agreed capital is 275,000, how much cash investment must he make? Agreed capital – Original capital (275,000 – 165,000 = 110,000) Original Capital of Luman is 165,000 which is the equipment contribution. Since, the agreed capital of Luman is 275,000, he will contribute cash amounting of 110,000. 4. Assuming that Para’s investment is equal to 30% of the total capital, how much additional investment should Luman make? Para, Capital is 99,000 which is equal to 30%. So, the total capital of Para is 330,000. (99,000/30%=330,000) Luman, Capital is 70% of the total capital. So, the 70% of 3 ...
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