PARTNERSHIP
1) FORMATION – when you established a partnership
- we measure the assets & liabilities @ Fair Market Value
2) OPERATION – when you allocate PROFITS & LOSSES to the partners
3) DISSOLUTION – there’s a dissolution whenever there’s a change in the ownership interest in the partnership
- Partnership is dissolved when there’s: admission of a new partner
withdrawal/retirement of an existing partner
4) LIQUIDATION – stop na yung operations ng partnership (terminated na)
Lump sum
Installment
PARTNERSHIP FORMATION
PROBLEM 1: Pinnacle and Maginhawa decided to form a partnership on March 15, 2019. Their Statement of
Financial Position on this date were:
ASSETS PINNACLE MAGINHAWA
Cash 65, 625₱ 164,063₱
Accounts Receivable 1,487,500 896, 875
Merchandise Inventory 875,000 885,937
Equipment 656,250 1,268,750
Total 3,084,375₱ 3,215,625₱
LIABILITIES & EQUITY
Accounts Payable 459,375 1,159,375
Pinnacle, Capital 2,625,000
Maginhawa, Capital 2,056,250
Total 3,084,375₱ 3,215,625₱
They agreed to the following adjustments:
1. Equipment of Pinnacle is underdepreciated by P87,500 and that Maginhawa is overdepreciated by 131,250.₱
2. Allowance for doubtful account to be set up amounting to P297,500 for Pinnacle andP196,875 for Maginhawa.
3. Inventories of P21,875 and P15,312 are worthless in the books of Pinnacle and Maginhawa
respectively. (Note: if WORTHLESS na yung inventories, we have to write them off. Babawasan natin yung
assets)
4. The partnership agreement provides for a profit and loss ratio of 70% to Pinnacle and 30% to Maginhawa
respectively.
QUESTIONS:
a. Upon the formation of the partnership, how much is the capital of Pinnacle and Maginhawa, respectively?
* These are the adjusted capital balances OR the
Fair Market Value of your assets less your liabilities.
Balance Under Under
Sheet depreciated
depreciated
Equipment
Less: Acc. Depn. ↓(understated)
↑(overstated)
Book Value ↑(overstated)
↓(understated)
Note:
Whenever binigyan ka
ng Balance
Sheets/Statement of
Financial Position during
formation, you assume that
these are @ Book Values
Acc. Receivable
Less: All. For DA
Book Value ↓
Pinnacle Maginhawa
Unadjusted 2,625,000 2,056,250
Adjustment 1 (87,500) 131,250
Adjustment 2 (297,500) (196,875)
Adjustment 3 (21,875) (15,312)
Adjusted 2,218,125 1,975,313
