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ACCOUNTANCY BUSSINESS AND MANAGEMENT

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Business Administration (BSBA)

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A Sole Proprietor and an Individual with No Business Form a Partnership

Mulles,the owner of a successful fertilizer business, felt that it is time to expand operations. Mulles offered to form a partnership with Lucena, the owner of a nearby warehouse. The Partnership would be called Mulles & Lucena Storage and Sales. Lucena accepted Mulles' offer and the Partnership was formed on July 1, 2011.

Presented below is the trial balance for Mulles Fertiizer Supply on June 30,2011:

Cash P229,

Accounts Receivable 2,103,

Allowance for Uncollectible Accounts P117,

Inventory 1,012,

Prepaid Rent 29,

Store Equipment 390,

Accumulated Depreciation 97,

Notes Payable 330,

Accounts Payable 505,

Mulles,Capital 2,714,

Total P3,764,250 P3,764,

The partners agreed to share profits and looses equally and decided to invest an equal amount in thepartnership. Lucena and Mulles agreed that Lucena's land is worth P500,000 and his Building P1,450,000 is to contribute cash in an amount sufficient to make his capital account balance equal to Mulles.

An agreement is reached by the two partners on the following terms:

a. The accounts receivable are to be valued at P1,799,000 and the allowance for uncollectible accounts will be eliminated. b. Inventory is to be decreased by P112,500. c. The prepaid rent is for the warehouse used by Mulles. All merchandise will be transferred to Lucena's building. No refund will be received on the unused rent paid in advance.

d. The store equipment has a fair value of P300,000. e. A the other assets and liabilities are to be transferred at their book values.

REQUIRED:

  1. Prepare the necessary journal entries in the books of Mulles.

  2. Prepare the opening journal entries in the books of the partnership and record the formation of the partnership in a new set of books.

  3. Prepare the necessary journal entries in the books of Mulles. a. The accounts receivable are to be valued at P1,799,000 and the allowance for uncollectible accounts will be eliminated.

Adjusting

Accounts Receivable 2,103,

1,799,

Collectible 304,

Journal Entry

Mulles,Capital 304,

Accounts Recievable 304,

Allowance Account Adjustment

Allowance for Doubtful Accounts 117,

Mulles,Capital 117,

b. Inventory is to be decreased by P112,.

Journal Entry

Mulles,Capital 112,

Inventory 112,

c. The prepaid rent is for the warehouse used by Mulles. All merchandise will be transferred to Lucena's building. No refund will be received on the unused rent paid in advance.

Journal Entry

Mulles,Capital 29,

Prepaid Rent 29,

Lucena

  • Cash P2,393,
  • Land 1,450,
  • Building 500,
  • Cash P443, P443,000- cash to be contributed by Lucena
  • Bulding 1,450,
  • Land 500,
  • P2,393,
  • Lucena,Capital P2,393,
  • P2,393,
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ACCOUNTANCY BUSSINESS AND MANAGEMENT

Course: Business Administration (BSBA)

486 Documents
Students shared 486 documents in this course

University: Tarlac State University

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A Sole Proprietor and an Individual with No Business Form a Partnership
Mulles,the owner of a successful fertilizer business, felt that it is time to expand operations.
Mulles offered to form a partnership with Lucena, the owner of a nearby warehouse. The
Partnership would be called Mulles & Lucena Storage and Sales. Lucena accepted Mulles' offer
and the Partnership was formed on July 1, 2011.
Presented below is the trial balance for Mulles Fertiizer Supply on June 30,2011:
Cash P229,500
Accounts Receivable 2,103,000
Allowance for Uncollectible Accounts P117,000
Inventory 1,012,500
Prepaid Rent 29,250
Store Equipment 390,000
Accumulated Depreciation 97,500
Notes Payable 330,000
Accounts Payable 505,500
Mulles,Capital 2,714,250
Total P3,764,250 P3,764,250
The partners agreed to share profits and looses equally and decided to invest an equal amount in
thepartnership. Lucena and Mulles agreed that Lucena's land is worth P500,000 and his Building
P1,450,000.Lucena is to contribute cash in an amount sufficient to make his capital account
balance equal to Mulles.
An agreement is reached by the two partners on the following terms:
a. The accounts receivable are to be valued at P1,799,000 and the allowance for
uncollectible accounts will be eliminated.
b. Inventory is to be decreased by P112,500.
c. The prepaid rent is for the warehouse used by Mulles. All merchandise will be
transferred to Lucena's building. No refund will be received on the unused rent paid in
advance.

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