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.
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 equitv.
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.