The balance sheet of South Company on November 30, 2019 before accepting East as his partner to
Question:
The balance sheet of South Company on November 30, 2019 before accepting East as his partner to form SouthEast Partnership is presented below:
South
Balance Sheet
As of November 30, 2019
Assets
CashP120,000
Accounts receivableP48,000
Less: Allowance for doubtful accounts3,00045,000
Notes receivable60,000
Merchandise inventory27,000
EquipmentP72,000
Less: Accumulated depreciation6,00066,000
Total assetsP318,000
Liabilities and Capital
Accounts payableP12,000
Notes payable60,000
H, capital246,000
Total liabilities and capitalP318,000
It is agreed that for purposes of establishing South’s interest the following adjustments shall be made:
1. The accounts receivable is estimated to be 90% realizable.
2. Interest at 8% on notes receivable dated March 1, 2019 is to be accrued.
3. The merchandise inventory is to be valued at P21,000.
4. The equipment is under-depreciated by P4,800.
5. Prepaid expenses of P2,400 and accrued expenses of P7,200 are to be recognized.
East is to invest cash equal to a one-third interest in the partnership.
What is the amount presented under the Cash account upon formation of the partnership?
What is the amount presented for South’s capital upon formation of the partnership?
What is the amount presented for East’s capital upon the formation of the partnership?
Under an independent assumption, if it was agreed that the partners are to have equal capital interests using the bonus method regardless of the partners’ investments, what is the amount of bonus given to East?
Expert Answer:
1 Profit Loss Account dr To Allowance for uncollectible accounts 1800 2 Interest Accru... View the full answer
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
