1. For several years, Peejay and Joshua have been operating their own retail pharmacies as sole proprietorships....
Question:
1. For several years, Peejay and Joshua have been operating their own retail pharmacies as sole proprietorships. They decided that several advantages could be gained if they combined their businesses into one operation. They leased a new facility and began operations as a partnership on January 2, 2020. Peejay was able to find a buyer for his prior business and sold it as a going concern. Joshua did not have an opportunity to sell his business so he transferred as many asserts as possible to the new partnership.
The following assets were contributed by Peejay and Joshua to start their new business:
Peejay | Joshua | ||
Book Value | Fair Value | ||
Cash | 375,000 | 82,000 | 82,000 |
Accounts Receivable | 48,000 | 40,000 | |
Inventory | 225,000 | 220,000 | |
Furnishings | 24,000 | 8,000 | |
Acc Dep – Furnishing | (12,000) | ||
Office Equipment | 38,500 | 20,000 | |
Acc Dep – Office Equipment | (20,000) | ||
Computer System | 23,200 | 5,000 | |
Acc Dep – Computer System | (17,200) | ||
Total | 375,000 | 396,500 | 375,000 |
Accounts Payable (assumed by Partnership) | 25,000 | 25,000 | |
- How much is the opening capital of Joshua?
- If the partners decided that the agreed capitalization ratio is 4.5:5.5, who will give the bonus and how much?
2. Lily contributed P24,000 and Robin contributed P48,000 to form a partnership, and they agreed to share profits in the ratio of their original capital contributions. During the first year of operations, they made a profit of P16,290; Lily withdrew P5,050 and Robin P8,000. At the start of the following year, they agreed to admit Tracey into the partnership. She was to receive one-fourth interest in the capital and profits upon payments of P30,000 to Lily and Robin, whose capital accounts were to be reduced by transfers to Tracey’s capital account of amounts sufficient to bring them bank to their original capital ratio.
How should the P30,000 paid by Tracey be divided between Lily and Robin?
- 3. D, E and F share partnership profits in the ratio of 2:3:5. On September 30, F opted to retire from the partnership. The capital balances on this date follow:
D, Capital - P25,000 E, Capital - P40,000 F, Capital - P35,000
How much is to be debited from D, assuming F is paid P39,000 in full settlement of his partnership interest?
Expert Answer:
1 Opening Capital of Joshua To determine the opening capital of Joshua we need to calculate the total fair value of the assets contributed by Joshua t... View the full answer
