BELLEN, GEMINAH C.

BSA-3

Chapter 1- Problem 3

Item Sunny Gloomy Partnership

Cash 180,000 180,000
Accounts Receivable 60,000 60,000
Inventory 120,000 120,000
Land   600,000 600,000
Total 360,000 600,000 960,000
Accounts Payable (60,000)   (60,000)
Adjusted Capital Balances 300,000 600,000 900,000

1. Journal Entry  

Cash 180,000
Accounts Receivable 60,000
Inventory 120,000
Land 600,000
Accounts Payable 60,000
Sunny, Capital 300,000
Gloomy, Capital 600,000

2. Additional Investment
Gloomy, Capital 600,000
Divide by: 70%
Total 857,142.86
Multiply by: 30%
Total 257,143
Sunny, Capital 300,000
Sunny Deficiency -

*Sunny Contribution has no deficiency

Sunny, Capital 300,000

Divide by: 30%
Total 1,000,000.00
Multiply by: 70%
Total 700,000
Gloomy, Capital 600,000
Gloomy Deficiency 100,000

*Gloomy shall make an additional investment

amounting to 100,000 to make his contribution
 proportionate to his profit-sharing ratio.

Journal Entry
Cash 100,000
Gloomy, Capital 100,000

3. Bonus Method

Item Sunny Gloomy Partnership

Cash 180,000 180,000
Accounts Receivable 60,000 60,000
Inventory 120,000 120,000
Land   600,000 600,000
Total 360,000 600,000 960,000
Accounts Payable (60,000)   (60,000)
Adjusted Capital Balances 300,000 600,000 900,000
Equal Credits 450,000 450,000 50%
(150,000) 150,000 450,000

a.) Compound Journal Entry

Cash 180,000
Accounts Receivable 60,000
Inventory 120,000
Land 600,000
Acounts Payable 60,000
Sunny, Capital (300,000+150,000) 450,000
Gloomy, Capital (600,000-150,000) 450,000

b.) Simple Journal Entry

Cash 180,000
Accounts Receivable 60,000
Inventory 120,000
Accounts Payable 60,000
Sunny, Capital 300,000

Land 600,000
Gloomy, Capital 600,000

Gloomy, Capital 150,000

 Sunny, Capital 150,000

4. Cash Settlement

Sunny Gloomy
Actual Contribution 300,000 600,000
Required Contribution 450,000 450,000
(150,000) 150,000

**Gloomy shall receive 150,000 from Sunny, however, this transaction shall not be recorded in
partnership books because it is assumed that it is to be settled outside the partnership and is not
included as transaction of the partnership.

5. Additional Investment/Withdrawal

Sunny Gloomy
Actual Contribution 300,000 600,000
Required Contribution 450,000 450,000
(150,000) 150,000
**Sunny shall make an additional investment amounting to 150,000 and Gloomy shall withdraw 150,000
from his initial investment to satisfy the agreed equal credits by the partners of the partnership.

Problem 5

a.) Adjusted Balances

Item Partner 1 Partner 2 Partnership

Cash 281,250 1,800,000 2,081,250
Accounts Receivable 430,000 800,000 1,230,000
Land 1,500,000 1,500,000
Building 1,400,000   1,400,000
Total 3,611,250 2,600,000 6,211,250
Accounts Payable 330,000 400,000 730,000
Notes Payable 375,657 375,657
Lawsuit Payable 300,000 300,000
Property Tax Payable 40,000   40,000
Adjusted Capital 2,941,250 1,824,343 4,765,593

Notes Payable, computed as:

Face amount 500,000

Multiply: PV of 1 0.7513148009
PV of Notes Payable 375,657

b.) Journal Entry  

Cash 2,081,250
Accounts Receivable 1,230,000
Land 1,500,000
Building 1,400,000
Accounts Payable 730,000
Notes Payable 375,657
Lawsuit Payable 300,000
Property Tax Payable 40,000
Partner 1, Capital 2,941,250
Partner 2, Capital 1,824,343

Variation #1
(a) (b) (b-a) Bonus
Partner 1 2,941,250 (4,765,593 x 50%) 2,382,796.50 (558,453.50)
Partner 2 1,824,343 (4,765,593 x 50%) 2,382,796.50 558,453.50

a.) Bonus - 558,453.50

b.) Cuter Partner - Partner 2
c.) The bonus given to the cuter partner - Partner 2, amounting to 558,453.50 shall
be treated as reduction to the capital credit of Partner 1.

d.) Journal Entry

Cash 2,081,250
Accounts Receivable 1,230,000
Land 1,500,000
Building 1,400,000
Accounts Payable 730,000
Notes Payable 375,657
Lawsuit Payable 300,000
Property Tax Payable 40,000
Partner 1, Capital 2,382,796.50
Partner 2, Capital 2,382,796.50

Variation #2
  Partner 1 Partner 2 Partnership
Net Contribution 2,941,250 1,824,343 4,765,593
Equal Interest
(4,765,593 x 50%) 2,382,796.50 2,382,796.50 4,765,593
Cash Receipt/Payment 558,453.50 (558,453.50) -

a.) Partner 1 shall receive cash payment from Partner 2 amounting to 558,453.50.
b.) The cash receipt or cash payment shall not be recorded in the partnership books since the
transaction is a personal transaction between the partners and not as a partnership transaction.

c.) Journal Entry

Cash 2,081,250
Accounts Receivable 1,230,000
Land 1,500,000
 Building 1,400,000
Accounts Payable 730,000
Notes Payable 375,657
Lawsuit Payable 300,000
Property Tax Payable 40,000
Partner 1, Capital 2,382,796.50
Partner 2, Capital 2,382,796.50

Variation #3
Partner 2, Capital 1,824,343
Divide by: 38%
Total 4,800,903
Multiply by: 62%
Total 2,976,560
Partner 1, Capital 2,941,250
Partner 1 Deficiency 35,310

*Partner 1 shall make an additional investment

amounting to 35,310 to make his contribution
proportionate to his equity interest.

Partner 1, Capital 2,941,250

Divide by: 62%
Total 4,743,951.61
Multiply by: 38%
Total 1,802,702
Partner 2, Capital 1,824,343
Partner 2 Deficiency -

*Partner 2 has no deficiency.

Partner 1 2,941,250 / 4,765,593 = 62%

Partner 2 1,824,343 / 4,765,593 = 38%

Variation #4
  Partner 1 Partner 2
Net Contribution 2,941,250 1,824,343
Equal Interest
(4,765,593 x 50%) 2,382,796.50 2,382,796.50
Investment/withdrawal 558,453.50 (558,453.50)

**Partner 1 shall withdraw 558,453.50 and Partner 2 shall make additional investment amounting to
558,453.50
Problem 6

Item Mr. Sun Mr. Moon Partnership

Cash 400,000 400,000
Accounts Receivable 200,000 200,000
Land 1,000,000 1,000,000
Equipment   150,000 150,000
Total 600,000 1,150,000 1,750,000
Mortgage Payable   250,000 250,000
Adjusted Capital Balances 600,000 900,000 1,500,000

1. Journal Entry  
Cash 400,000
Accounts Receivable 200,000
Land 1,000,000
Equipment 150,000
Mortgage Payable 250,000
Mr. Sun, Capital 600,000
Mr. Moon, Capital 900,000

2. Additional Contribution
Mr. Moon, Capital 900,000
Divide by: 50%
Total 1,800,000
Multiply by: 50%
Total 900,000
Mr. Sun, Capital 600,000
Mr. Sun Deficiency 300,000

*Mr. Sun shall make an additional investment

amounting to 300,000 to make his contribution
proportionate to his equity interest.

Mr. Sun, Capital 600,000

Divide by: 50%
Total 1,200,000.00
Multiply by: 50%
Total 600,000
Mr. Moon, Deficiency 900,000
Mr. Moon, Capital -

*Mr. Moon has no deficiency.

 3. Bonus on Initial Investment
  Actual Contribution   Bonus Method
Mr. Sun 600,000 (1,500,000 x 50%) 750,000
Mr. Moon 900,000 (1,500,000 x 50%) 750,000
Total 1,500,000 1,500,000

The bonus given to Mr. Sun amounting to 150,000 (750,000-600,000) is treated as a reduction to the
capital of Mr. Moon.

Journal Entry  

Cash 400,000

Accounts Receivable 200,000

Land 1,000,000

Equipment 150,000

Mortgage Payable 250,000

Mr. Sun, Capital (600,000+150,000) 750,000

Mr. Moon, Capital (900,000-150,000) 750,000

4. Variation to Bonus Method- Cash Settlement

  Mr. Sun Mr. Moon Partnership
Net Contribution 600,000 900,000 1,500,000
Equal Interest
(1,500,000 x 50%) 750,000 750,000 1,500,000
Cash Receipt (Payment) (150,000.00) 150,000.00 -

*Mr. Moon shall receive 150,000 from Mr. Sun.

a.) Compound Journal Entry

Cash 400,000
Accounts Receivable 200,000
Land 1,000,000
Equipment 150,000
Mortgage Payable 250,000
Mr. Sun, Capital (600,000+150,000) 750,000
Mr. Moon, Capital (900,000-150,000) 750,000

b.) Simple Journal Entry

Cash 400,000
Accounts Receivable 200,000
Mr. Sun, Capital 600,000
 Land 1,000,000
Equipment 150,000
Mortgage Payable 250,000
Mr. Moon Capital 900,000

Mr. Moon 150,000

Mr. Sun 150,000

4. Variation to Bonus Method - additional investment/withdrawal

  Mr. Sun Mr. Moon Partnership
Net Contribution 600,000 900,000 1,500,000
Equal Interest
(1,500,000 x 50%) 750,000 750,000 1,500,000
Cash Receipt (Payment) (150,000.00) 150,000.00 -

*Mr. Sun shall make an additional investment to the partnership amounting to 150,000. On the other
hand, Mr. Moon shall withdraw his excess contribution of 150,000 to the partnership in order to
equalize the balances of the partner’s capital accounts.