Question

After the first quarter of the current year, Darius and Jose, both proprietors, decide to combine their businesses and created a partnership. Prior to the partnership formation, their balance sheets show the following balances:

	Darius	Jose
Cash	20,000.00	25,000.00
Accounts Receivable	55,000.00	30,000.00
Allowance for Doubtful Account	5,000.00	2,500.00
Inventories	150,000.00	145,650.00
Store equipment	50,000.00
Accumulated Depreciation-S equipment	5,000.00
Delivery Equipment		80,000.00
Accumulated Depreciation-del. equipment		16,000.00
Furniture	10,000.00	7,500.00
Accounts Payable	35,000.00	50,000.00
Notes Payable	10,000.00	20,000.00
Capital	230,000.00	199,650.00

The partners agreed on the following adjustments to their books:

1. Both their Allowance for Doubtful Accounts will be increased by 4% of Account Receivable.

2. Darius inventories will be valued at P 145,000 while that of Jose will be reduced by 10%.

3. Store Equipment will be taken in the partnership books at book value.

4. The Delivery Equipment and its contra-account will be taken up as is in the partnership books.

5. The furniture will be taken at P8,000 and P5,000, respectively.

6. Darius and Jose will make an additional cash investment that will make their contributions equal to P250,000 each.

7.They also agreed that a new set of books will be used by the partnership. Instructions:

REQUIRED:

PREPARE THE BALANCE SHEET OF THE NEWLY FORMED PARTNERSHIP IMMEDIATLY AFTER FORMATION.

Answer 1