A Sole Proprietor and an Individual with no Business Form a Partnership
On Apr. 8 2011, Pascua who has her own retail business and Dela Cruz, decided to form a partnership wherein they will divide profits in the ration of 40:60, respectively. The statement of financial position of Pascua is as follows:
assets
Cash 4,000
Accounts Receivable 160,000
Less: Allowance for uncollectible accouns 16,000 144,000
Inventory 200,000
Equipment 50,000
Less:Accumulated Depreciation 10,000 40,000
Total assets 388,000
liabilities and capital
Accounts payable 36,000
Pascua, Capital 352,000
Total liabilities and capital 388,000
CONDITIONS AGREED UPON THE FORMATION OF PARTNERSHIP:
a. Accounts receivable of pascua is estimated to be 70% realizable.
b. Accumulated depreciation of the equipment will be increased by 10,000.
c. accounts payable will be assumed by the parthership
d. the capital of the partnership is based on the adjusted capital balance of Pascua. Dela Cruz is to contribute cash in order to make the partner;s capital balances proportionate to the profit and loss ratio.
REQUIRED:
1. prepare the necessary journal entries in the books of pascua.
2. prepare the openning journal entries in the books of the partnership.
