Bruce and Rachel agree to form a partnership on July 1. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce's assets and liabilities are given below.
(see attached image, please answer it based on your knowledge, thank you!)
Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership.
The partners have agreed on the following:
a) capital accounts will remain fixed;
b) 12% interest profit computed on capital;
c) salaries of P30,000 each for 2019 but will be twice this amount next year and thereafter;
d)10% interest charge on partners' drawings made beyond the agreed salaries; and
e) remaining profits are to be shared equally.
Direction:
a. Prepare two journal entries to set up the partnership.
b. Prepare a statement of financial position for the partnership as at July 1 just after formation.
c. Profit (before interest and salaries) on Dec. 31 was P120,500. Cash withdrawals made by Bruce and Rachel amounted to P30,000 and P40,000, respectively. Prepare a profit distribution table and one entry to record the distribution.
d. Set up the general ledger (T Accounts) accounts to show each partner's equity.
e. Prepare a statement of changes in partners equity.
Extracted text: 8. Bruce and Rachel agree to form a partnership on July 1. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce's assets and liabilities are given below. Agreed value P 30,000 138,000 240,000 200,000 14,000 Book value P32,000 Accounts Receivable Inventory Equipment Accounts Payable Notes Payable 240,000 322,000 200,000 14,000 Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership. The partners have agreed on the following: a) capital accounts will remain fixed; b) 12% interest profit computed on capital; c) salaries of P30,000 each for 2019 but will be twice this amount next year and thereafter; d) 10% interest charge on partners' drawings made beyond the agreed salaries; and e) remaining profits are to be shared equally. AD Direction: a. Prepare two journal entries to set up the partnership. D. Prepare a statement of financial position for the partnership as at July 1 just after formation. C. Profit (before interest and salaries) on Dec. 31 was P120,500. Cash withdrawals made by Bruce and Rachel amounted to P30,000 and P40,000, respectively. Prepare a profit distribution table and one entry to record the distribution. the d. Set up general ledger (T Accounts) accounts to show each partner's equity. Prepare a statement of changes in partners' eauitv.