Problem 1-1

1. a.

Books of Pedro Castro will be retained by the partnership

To adjust the assets and liabilities of Pedro Castro.

1. Pedro Castro, Capital............................................................ 600

Merchandise Inventory..................................................... 600

Allowance for Bad Debts................................................. 200
3. Accrued Interest Receivable................................................. 35

Pedro Castro, Capital........................................................ 35
Computation:
P1,000 x 6% x 3/12 = P15
P2,000 x 6% x 2/12 = _20
Total................................P35

Accrued Interest Payable.................................................. 100
(P4,000 x 5% x 6/12 = P100)

Accumulated Depreciation – Furniture and Fixtures........ 800
6. Office Supplies..................................................................... 400

Pedro Castro, Capital........................................................ 400
To record the investment of Jose Bunag.
Cash. ........................................................................................... 15,067.50

Jose Bunag, Capital.............................................................. 15,067.50
Computation:
Pedro Castro, Capital
(1) P600 P31,400
(2) 200 35 (3)
(4) 100 400 (6)
(5) ___800
P1,700 P31,835
P30,135
Jose Bunag, Capital : 1/2 x P30,135 = P15,067.50
b. A new set of books will be used
Books of Pedro Castro
To adjust the assets and liabilities.

See Requirement (a).
To close the books.
Notes Payable.............................................................................. 4,000

Accounts Payable........................................................................ 10,000
Accrued Interest Payable............................................................. 100
Allowance for Bad Debts............................................................ 1,200
Accumulated Depreciation – Furniture and Fixtures................... 1,400
Pedro Castro, Capital................................................................... 30,135
Cash...................................................................................... 6,000
Notes Receivable.................................................................. 3,000
Accounts Receivable............................................................. 24,000
Accrued Interest Receivable................................................. 35
Merchandise Inventory......................................................... 7,400
Office Supplies..................................................................... 400
Furniture and Fixtures........................................................... 6,000
New Partnership Books
To record the investment of Pedro Castro.
Cash .......................................................................................... 6,000

Notes Receivable......................................................................... 3,000
Accounts Receivable................................................................... 24,000
Accrued Interest Receivable........................................................ 35
Merchandise Inventory................................................................ 7,400
Office Supplies............................................................................ 400
Furniture and Fixtures................................................................. 6,000
Notes Payable....................................................................... 4,000
Accounts Payable.................................................................. 10,000
Accrued Interest Payable...................................................... 100
Allowance for Bad Debts...................................................... 1,200
Accumulated Depreciation – Furniture and Fixtures............. 1,400
Pedro Castro, Capital............................................................ 30,135
To record the investment of Jose Bunag.
Cash. ........................................................................................... 15,067.50

Jose Bunag, Capital.............................................................. 15,067.50
2. Castro and Bunag Partnership
Balance Sheet
October 1, 2008
Assets
Cash .......................................................................................................... P21,067.50

Notes receivable......................................................................................... 3,000.00
Accounts receivable................................................................................... P 24,000
Less Allowance for bad debts..................................................................... ___1,200 22,800.00
Accrued interest receivable........................................................................ 35.00
Merchandise inventory............................................................................... 7,400.00
Office supplies .......................................................................................... 400.00
Furniture and fixtures................................................................................. 6,000
Less Accumulated depreciation.................................................................. ___1,400 __4,600.00
Total Assets....................................................................................... P59,302.50
Liabilities and Capital
Notes payable .......................................................................................... P 4,000.00

Accounts payable....................................................................................... 10,000.00
Accrued interest payable............................................................................ 100.00
Pedro Castro, Capital.................................................................................. 30,135.00
Jose Bunag, Capital.................................................................................... _15,067.50
Total Liabilities and Capital.............................................................. P59,302.50

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1. a.

Books of Pedro Castro will be retained by the partnership

To adjust the assets and liabilities of Pedro Castro.

1. Pedro Castro, Capital............................................................ 600

2. Pedro Castro, Capital............................................................ 200

3. Accrued Interest Receivable................................................. 35

4. Pedro Castro, Capital............................................................ 100

5. Pedro Castro, Capital............................................................ 800

6. Office Supplies..................................................................... 400

To record the investment of Jose Bunag.

Cash. ........................................................................................... 15,067.50

b. A new set of books will be used

Books of Pedro Castro

To adjust the assets and liabilities.

To close the books.

Notes Payable.............................................................................. 4,000

New Partnership Books

To record the investment of Pedro Castro.

Cash .......................................................................................... 6,000

To record the investment of Jose Bunag.

Cash. ........................................................................................... 15,067.50

Cash .......................................................................................................... P21,067.50

Liabilities and Capital

Notes payable .......................................................................................... P 4,000.00

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