1.
Chapters 17-21

2.
Chapter 17 – Partnership Formation

3.
1.) General Partnership
Types of Partnership

4.
2.) Limited Partnership
Types of Partnership

5.
Partnership Ownership Interest

6.
Partnership Formation Transaction
ABC
Partnership

7.
1. Ease of Formation
2. Limited Life
3. Assignment of Partner’s Interest
4. Unlimited Liability
5. Mutual Agency
6. Separate Legal Personality
7. Sharing of Profits and Losses
General Partnership Features

8.
Partnership Formation
Illustrative Problem:
On June 30, 2020, the Statement of Financial Position of Krispy Grocery appeared as
follows:
Assets Liabilities and Capital
Cash P 34,500 Notes Payable P 12,500
Accounts Receivable 55,000 Accounts Payable 40,000
Notes Receivable 21,000 Krispy, Capital 474,500
Inventories 57,500
Land 120,000
Equipment P 80,000
Less: Acc. Deprn. 56,000 24,000
Building P245,000
Less: Acc. Deprn. 30,000 215,000
Total P527,000 Total P527,000

9.
Illustrative Problem – Cont:
Krispy and Cream agree to form a partnership, with Krispy investing his
grocery store. The following are their agreements:
– Set up 10% of the Account receivable as doubtful accounts.
– Inventories should be adjusted to 85% of its book value.
– Equipment should be adjusted to its market value of P20,000
– Land has an appraised value of P150,000.
– Accrued expenses should be set up in the amount of P2,500.
– Cream will be investing enough cash to make the total agreed capitalization of
P800,000. Krispy will be credited for a 70% equity of the agreed capitalization.
Required:
1. Make the entries to adjust and close the books of Krispy.
2. Record the investments of the two partners in the New partnership books.
3. Prepare the Statement of Financial Position immediately after the
formation.
Partnership Formation

10.
Illustrative Problem – Solution:
Partnership Formation
Books of Krispy:
I - Adjustments:
1.) Krispy, Capital 5,500.00
Allowance for D/A 5,500.00
2.) Krispy, Capital 8,625.00
Inventories 8,625.00
3.) Krispy, Capital 4,000.00
Accum. Depr'n – Equipment 4,000.00
4.) Land 30,000.00
Krispy, Capital 30,000.00
5.) Krispy, Capital 2,500.00
Accrued Expenses 2,500.00

11.
Illustrative Problem – Solution:
Partnership Formation
Books of Krispy:
Closing Entry:
Notes Payable 12,500.00
Accounts Payable 40,000.00
Accrued Expenses 2,500.00
Allow for D/A 5,500.00
Accum Depr'n - Equipment 60,000.00
Accum Depr'n - Bldg 30,000.00
Krispy, Capital 483,875.00
Cash 34,500.00
Accounts Receivable 55,000.00
Notes Receivable 21,000.00
Inventories 48,875.00
Land 150,000.00
Equipment 80,000.00
Building 245,000.00

12.
Books of the New Partnership
Partnership Formation
2.) Investment of the new Partners
Cash 34,500.00
Accounts Receivable 55,000.00
Notes Receivable 21,000.00
Inventories 48,875.00
Land 150,000.00
Equipment 20,000.00
Building 215,000.00
Notes Payable 12,500.00
Accounts Payable 40,000.00
Accrued Expenses 2,500.00
Allow for D/A 5,500.00
Krispy, Capital 483,875.00
To record the investment of
Krispy

13.
Cash 316,125.00
Cream, Capital (800,000 – 483,875) 316,125.00
To record the investment of Cream
Cream, Capital 76,125.00
Krispy, Capital 76,125.00
Partnership Formation
Agreed Capital 800,000.00
X Krouger's Interest 70%
Krouger's Capital Credit after the formation 560,000.00
Less: Krouger's adjusted capital 483,875.00
Bonus to Krouger 76,125.00

14.
3.) Krispy Cream Partnership
Statement of Financial Position
June 30, 2019
ASSETS:
Cash 350,625.00
Accounts Receivable 55,000.00
Less: Allow for D/A 5,500.00 49,500.00
Notes Receivable 21,000.00
Inventories 48,875.00
Land 150,000.00
Equipment 20,000.00
Building 215,000.00
Total Assets 855,000.00
Partnership Formation
LIABILITIES & EQUITIES
Notes Payable 12,500.00
Accounts Payable 40,000.00
Accrued Expenses 2,500.00
Krispy, Capital 560,000.00
Cream, Capital 240,000.00
Total Liabilities &
Equities 855,000.00

15.
Partnership Formation