A.

Two Individuals investing Cash and Non-Cash Assets with Liability

On September 1, 2011, Hava and Lapad formed a partnership with cash contribution of P123,456 and
P456,789 respectively. In addition to Hava's cash contribution, he also contributed a typewriter costing
P7,000, but with an agreed valuation of P5,000. Also, Lapad contributed a piece of land costing P50,000,
but with an agreed valuation of P 100,000. The land was mortgaged in a bank for P 80,000, and it was
agreed that the partnership will absorb the mortgage liability in the bank.

The opening entry in the partnership book to record the investment should be:

1. Investment of Hava Debit Credit

_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

. 2. Investment of Lapad Debit Credit

_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

B. Two Individuals with Cash and Non-Cash Investment

Agahan and Japonan agreed to form a partnership with a profit and loss ratio of 50/50. On May 1, Agahan
contributed: cash - P2,000,000; office equipment with a cost of P50,000 and accumulated depreciation of
P20,000 and with a current fair market value of P20,000 and a second hand delivery vehicle bought last
year for P 500,000 but now with a fair market value of P400,000. While on May 2, Japonan contributed
cash - P360, 000, merchandise bought 3 months ago for P2, 000,000 but now with a fair market value of
P2, 110,000 and an old furniture bought 9 years ago at a cost of P15, 000. It was used in a business and the
record showed an accumulated depreciation of P13, 500. Now it has a fair market value of P2, 000. Finally,
they agreed to share profits and losses at 50:50 ratio and the total partnership equity should be P5,
000,000. Their capital balances should be the same as their profit and loss ratio.

Q1. The opening entry in the partnership book to record the investment should be:

1. Investment of Agahan Debit Credit

_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

. 2. Investment of Japonan Debit Credit

_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

Q2 The additional cash investments of Agahan and Japonan, respectively, to make their capital
proportionate to their profit and loss ratio and the total partnership capital is P5,000,000 is ____________
for Agahan and ______________ for Japonan.

C. Sole Proprietorship and an Individual. The Individual to Invest a Certain Percentage of the Capital of the
Proprietor.
Mr. Manny Pinger has been in business for quite sometime as a sole proprietor of a comedy Bar. He is in
need of working capital to undertake business expansion, so he decided to invite his friend, Miss Maiqui
Aray to join him in the new partnership. The new partnership will be called "Funny Comedy Bar" and will
assume the assets and liabilities of Manny's Comedy Bar.

On January 2, 2012, Maiqui accepted the offer and will invest cash equivalent to 40% of the capital of
Manny after the revaluation of his assets. Both agreed to revalue the assets of Manny's Comedy Bar as
follows:
Revalued at
Accounts Receivable P 44,000
Bar Inventory 65,000
Bar Furniture and Equipment 20,000
Land 150,000
Building 100,000

The financial position of Manny's business at the time of the formation of the partnership
with Maiqui is shown below :
MANNY’S COMEDY BAR
BALANCE SHEET
January 1, 2012

ASSETS
Current Assets
Cash P14,000
Accounts Receivable P45,000
Less: Allowance for doubtful accounts 1,500 43,500
Bar Inventory 60,000
Supplies 5,000
Total Current Assets P122,600
Plant, Property and Equipment
Land P 80,000
Building P 150,000
Less Accumulated Depreciation 25,000 125,000
Bar Furniture & Equipment P 30,000
Less: Accumulated Depreciation 8,000 22,000
Total Plant Property and Equipment 227,000
Total Assets P 349,500

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Accounts Payable P 22,000
Notes Payable 16,000 P 38,000
Owner's Equity
Pinger, Capital 311,500
Total Liabilities and Capital P349,500

REQUIRED:
1. Prepare the journal entries to record the investment of Manny and Maiqui using a new book of
the partnership.
2. Prepare the Initial Trial Balance of “Funny Comedy Bar” immediately upon formation.
BOOK OF MANNY

The capital adjustment are as follows:

1. Regarding accounts receivable

_______________________________ __________ __________
_______________________________ __________ __________
2. Regarding Bar inventory
_______________________________ __________ __________
_______________________________ __________ __________
3. Regarding Bar Furniture and Equipment
_______________________________ __________ __________
_______________________________ __________ __________
4. Regarding the land
_______________________________ __________ __________
_______________________________ __________ __________
5. Regarding the building
_______________________________ __________ __________
_______________________________ __________ __________

6. Record the closing entry in Manny’s book.

_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

BOOK OF THE NEW PARTNERSHIP

7. Record the investment of Manny
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________
8. Record the investment of Maiqui
_______________________________ __________ __________
_______________________________ __________ __________
_______________________________ __________ __________

9. The initial Trial Balance of is

FUNNY COMEDY BAR

Trial Balance
January 2, 2012

Debit Credit

Cash ____________ ____________

Accounts Receivable ____________ ____________
Less: Allowance for doubtful accounts ____________ ____________
Merchandise Inventory ____________ ____________
Supplies ____________ ____________
Land ____________ ____________
Building ____________ ____________
Office Equipment ____________ ____________
Accounts Payable ____________ ____________
Notes Payable ____________ ____________
Pinger, Capital ____________ ____________
Aray, Capital ____________ ____________
Total P ___________ ____________