MAABILIDAD SERVICE    
Trial Balance
For the year ended December 31, 200a 

	DR	CR
Cash	P10,000
Accounts receivables	20,000
12% Notes receivables	130,000
Prepaid supplies	20,000
Computers	100,000
Furniture and fixtures	150,000
Acounts Payable		P70,000
Maabiliad, capital		350,000
Maabilidad,drawing	60,000
Comuter rental revenue		50,000
Printing revenue		150,000
Repairs revenue		130,000
Salaris expense	150,000
Rental expense	72,000
Transportation expense	12,000
Telphone expense	24,000
Business taxes	2,000
	P750,000	P750,000

 Partnership Formation

The business is progressing. To cope with the expansion of the business, additional working capital would be raised. As a result, Mr. Noel Masipag and Mr. Jessie Mapera, two of Mr. Maabilidad’s friends, are invited to join as partners in the business. They signed a partnership agreement with the following stipulations :

 

Marlo Maabilidad :

1. He would be the managing partner with a salary of P20,000 per month and a 10% bonus after salary and interest on capital.
2. He will own 50% interest in the partnership as industrial-capitalist partner based on the adjusted value of the existing sole proprietorship.

 

Noel Masipag :

1. He will work as an industrial-capitalist partner with a salary of P15,000.
2. He will own 20% interest in partnership.
3. He will contribute his own delivery truck which he purchased for P400,000. The replacement cost of a brand new truck is P500,000. A second-hand truck with the same feature could be purchased at a fair value of P100,000. The truck has remaining estimated useful life of 10 years. Additional cash is to be invested to complete his capital share.

 

Jessie Mapera :

1. He will contribute cash P2,000 and a land and building with an estimated useful life of 20 years. The cost of the building constructions is P180,000 but the fair market value is P120,000. The land he contributed was acquired through donation, but the fair market value is P100,000.
2. He will have a 30% interest in the partnership as a silent partner.
3. His admission is accounted for under bonus method.

 

The profit ratio agreement is different from their interest in the partnership agreed as follows :

Mario Maabilidad - 40%

Noel Masipag - 30%

Jessie Mapera - 30%

 

Additional agreements:

1. The Maabilidad Service’s assets and liabilities are to be assumed by the partnership to be named as M-3 Partnership.
2. The partnership shall not only engage in service business but it shall buy and sell computers to clients.
3. The partners shall not diminish their respective average capital lower than their agreed capital interest in the partnership’s net assets. Any amount of deficiency shall be charged with 12% interest. Likewise, any amount of excess in the agreed capital shall be earning 12% interest income.
4. Drawings shall not be considered as part of the computation of the partner’s average capital. Any drawings shall not exceed their respective monthly salaries. The monthly salary shall be charged against the partner’s drawings account. If withdrawals within a month exceed their monthly salary, the excess should be constructed as permanent capital withdrawals.
5. The following adjustments be made to the sole proprietorship’s accounts before the formation of the partnership.

 

1. Accounts receivables are collectible only at 95%.
2. A six-month accrued interest of the notes receivables should be recognized and recorded.
3. Prepaid supplies available upon conduct of inventory count is only P2,000.
4. Computer depreciated annually at 20% of depreciable cost. Salvage value is 10% of historical cost. ( use full year depreciation )
5. Furniture and fixtures have an estimated useful life of 4-years. Salvage value is P26,800, using straight line method. ( use full year depreciation ).

The partnership agreement was perfected as of January 1, 200B. All partners complied with their agreed capital contribution.

 

Requirements:

1. Record the following in the books of Maabilidad Service:
   a. Adjusting entries
   b. Closing entries for the nominal accounts
   c. Journal entries to close the real accounts and finally close the single proprietorship's books

2. Record the opening entries for the partners' investments in the books of the M-3 Partnership

3. Prepare the M-3 Partnership's Balance Sheet as of January 1, 200B

Answer rating: 100% (QA)

MAABABILIDAD SERVICE Adjusting entries Accounts receivables 9510020000 19000 20000 19000 1000 Bad debts 1000 Accounts receivables Debit Credit bbd 20000 Bad debt 1000 bcd 19000 Bad debt Debit Credit A... View the full answer