Miles

a.
Cash 300,000
Accounts Receivable 800,000
Allowance for Bad Debts 60,000
Merchandise Inventory 1,800,000
Store Equipment 500,000
Accumulated Depreciation 150,000 b.
Accounts Payable 350,000
Miles, Capital 2,840,000
3,400,000 3,400,000

c.
The accounts receivable are estimated to be 90% collectible

Miles, Capital 20,000

Allowance for Bad Debts 20,000
(80,000 - 60,000)

Merchandise costing P 80,000 is deemed obsolete and worthless

Miles, Capital 80,000

Merchandise Inventory 80,000

The store equipment has a fair value of P 400,000

Accumulated Depreciation 50,000

Miles, Capital 50,000
(150,000 - 100,000)

2.2)
Allowance for Bad Debts (60,000 - 20,000) 80,000
Accumulated Depreciation (150,000 - 50,000) 100,000
Accounts Payable 350,000
Miles, Capital (2,840,000+50,000-100,000) 2,790,000
Cash
Accounts Receivable
Merchandise Inventory (1,800,000-80,000)
Store Equipment

M & L Sales (New Book)

Cash 300,000
Accounts Receivable 800,000
Merchandise Inventory 1,720,000
Store Equipment 400,000
Allowance for Bad Debts
Accounts Payable
Miles, Capital
To record the investment of partner Miles

Cash (2,790,000 - 1,800,000) 990,000

Land 600,000
Building 1,200,000
Lou, Capital
To record the investment of partner Lou
 M & L Sales
Statement of Financial Position
December 1, 2020

Assets
300,000 Cash (300,000 + 990,000)
800,000 Accounts Receivable 800,000
1,720,000 Allowance for Bad Debts 80,000
500,000 Merchandise Inventory
Store Equipment
Land
Building
Total Assets

Liabilities and Partners' Equity

80,000 Accounts Payable
350,000 Miles, Capital
2,790,000 Lou, Capital
Total Liabilities and Partners' Equity

2,790,000
osition

1,290,000

720,000
1,720,000
400,000
600,000
1,200,000
5,930,000

Equity
350,000
2,790,000
2,790,000
5,930,000
 MIC MAC
Book Value Fair Value Book Value
Cash 150,000 150,000 120,000
Accounts Receivable (net) 130,000 115,000 90,000
Merchandise Inventory 750,000 720,000 430,000
Property and Equipment (net) 1,200,000 1,230,000 880,000
Total Assets 2,230,000 2,215,000 1,520,000

Accounts Payable 140,000 140,000 80,000

Accrued Expenses 25,000 25,000 10,000
Notes Payable 300,000 300,000 -
Capital 1,765,000 1,750,000 1,430,000
Total Liabilities & Capital 2,230,000 2,215,000 1,520,000
MAC
Fair Value 1)
120,000
80,000 a.
410,000
950,000
1,560,000
b.
80,000
10,000
-
1,470,000 c.
1,560,000

2)

a.

b.

c.
 ADJUSTING ENTRIES
In the books of MIC

Mic, Capital 15,000

Allowance for Bad Debts
To bring the value of accounts receivable to 115,000

Mic, Capital 30,000

Merchandise Inventory
To write off obsolete merchandise

Property and Equipment 30,000

Mic, Capital
To bring the value of property and equipment to 1,230,000

In the books of MAC

Mac, Capital 10,000

Allowance for Bad Debts
To bring the value of accounts receivable to 80,000

Mac, Capital 20,000

Merchandise Inventory
To write off obsolete merchandise

Property and Equipment 70,000

Mac, Capital
To bring the value of property and equipment to 950,000
 CLOSING ENTRIES
1) In the books of MIC

Allowance for Bad Debts

15,000 Accounts Payable
Accrued Expenses
Notes Payable
Mic, Capital (1,765,000 + 30,000 - 45,000)
30,000 Cash
Accounts Receivable
Merchandise Inventory
Property and Equipment
30,000 To close the book of Mic

2) In the books of MAC

Allowance for Bad Debts

Accounts Payable
10,000 Accrued Expenses
Mac, Capital (1,430,000 + 70,000 - 30,000)
Cash
Accounts Receivable
20,000 Merchandise Inventory
Property and Equipment
To close the book of Mac

70,000
 I.

15,000 a.
140,000
25,000
300,000
1,750,000
150,000
130,000
720,000
1,230,000

b.

10,000
80,000
10,000
1,470,000
120,000
90,000
410,000
950,000
II.

a.
 FORMATION OF PARTNERSHIP (M & M Trading)
A new set of books will be used by the partnership, M & M Trading

Cash 150,000
Accounts Receivable 130,000
Merchandise Inventory 720,000
Property and Equipment 1,230,000
Allowance for Bad Debts 15,000
Accounts Payable 140,000
Accrued Expenses 25,000
Notes Payable 300,000
Mic, Capital 1,750,000
To record the investment of partner Mic

Cash 120,000
Accounts Receivable 90,000
Merchandise Inventory 410,000
Property and Equipment 950,000
Allowance for Bad Debts 10,000
Accounts Payable 80,000
Accrued Expenses 10,000
Mac, Capital 1,470,000
To record the investment of partner Mac

The old books of Mic will be retained as the partnership books

Cash 150,000
Accounts Receivable 130,000
Merchandise Inventory 720,000
Property and Equipment 1,200,000
Accumulated Depreciation 30,000
Allowance for Bad Debts 15,000
Accounts Payable 140,000
Accrued Expenses 25,000
Notes Payable 300,000
Mic, Capital 1,750,000
To record the investment of partner Mic

Cash 120,000
Accounts Receivable 90,000
Merchandise Inventory 410,000
Property and Equipment 950,000
Allowance for Bad Debts 10,000
Accounts Payable 80,000
Accrued Expenses 10,000
Mac, Capital 1,470,000
To record the investment of partner Mac
I. (New set of books)

M & M Trading
Statement of Financial Position
April 30, 2020

ASSETS
Cash 270,000
Accounts Receivable 220,000
Allowance for Bad Debts - 25,000 195,000
Merchandise Inventory 1,130,000
Property and Equipment 2,180,000
Total Assets 3,775,000

LIABILITIES and PARTNERS' EQUITY

Accounts Payable 220,000
Accrued Expenses 35,000
Notes Payable 300,000
Mic, Capital 1,750,000
Mac, Capital 1,470,000
3,775,000

II. (Old books of Mic)

M & M Trading
Statement of Financial Position
April 30, 2020

ASSETS
Cash 270,000
Accounts Receivable 220,000
Allowance for Bad Debts - 25,000 195,000
Merchandise Inventory 1,130,000
Property and Equipment 2,150,000
Accumulated Depreciation 30,000
Total Assets 3,775,000

LIABILITIES and PARTNERS' EQUITY

Accounts Payable 220,000
Accrued Expenses 35,000
Notes Payable 300,000
Mic, Capital 1,750,000
Mac, Capital 1,470,000
3,775,000