Carla has successfully operated a sari-sari store for several years. She wishes to expand the business, but
Question:
- Carla has successfully operated a sari-sari store for several years. She wishes to expand the business, but to do so she needs additional capital, which she is unable to supply. She, therefore, enters into an agreement with Manny to reorganize and continue her business as a partnership called “CM Partnership.” The partners agree that after revaluation of certain assets, is to invest her ongoing business in the partnership and additional cash from her personal assets to bring her total investment to Php 50,000.
Manny is to contribute a computer costing Php 30,000 with a FMV of Php 25,000, merchandise inventory worth Php 10,000 and cash capital sufficient to make his total investment equal to that of Carla. The accumulated depreciation of the computer is Php 8,000.
The post-closing trial balance of Carla just prior to the formation of the partnership appeared as follows:
Debit | Credit |
Cash | 2,000 |
Accounts Receivable | 5,000 |
Merchandise Inventory | 10,000 |
Store Equipment | 8,000 |
Accum depreciation-SE | 1,600 |
Account Payable | 6,400 |
Carla, Capital | 17,000 |
25,000 | 25,000 |
The partners agree to adjust the books of Carla as follows: The realizable value of accounts receivable is 80%, the merchandise inventory should be revalued at Php 9,000 and the accumulated depreciation should be increased to Php 3,000.
Required:
2a. Journalize adjustments in the books of Carla
2b. Close the books of Carla.
2c. Record the investments in the CM Partnership’s books.
Federal Taxation 2017 Individuals
ISBN: 9780134420868
30th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson