On January 1, 2017, Len, May and Nancy decided to form a business partnership to operate supermarket. Len and May both owned a grocery business with the Statements of Financial Position as of December 31, 2016: LEN MAY Cash P10M P20M Accounts Receivable 20M 30M Inventories 70M 40M Property, Plant and Equipment 50M 10M Accounts Payable 40M 20M Notes Payable 30M (10%) 50M (5%) Capital 80M 30M LYCEUM OF SUBIC BAY Subic Bay Freeport Zone Advanced Financial Accounting Review Allan B. Santos CPA 3 | P a g e The following additional notes are provided: a. Len and May will contribute all its assets and liabilities to the newly formed partnership. b. The parties agree to provide 10% and 20% allowance for bad debts to the accounts receivable of Len and May, respectively. c. The inventories of LEN and MAY are reported at historical cost and have net realizable value of P60M and P45M, respectively. d. The PPE of LEN and MAY have not been depreciated and should be depreciated by 40% and 30%, respectively. e. The interest payable on both notes payable were unrecorded and unpaid since the date of contract. LEN’s note payable is dated April 1, 2016 while MAY’s note payable is dated June 30, 2016. f. Nancy shall have 20% interest in the partnership upon contribution of sufficient cash. What is the amount of cash to be contributed by Nancy on January 1, 2017?
On January 1, 2017, Len, May and Nancy decided to form a business
and May both owned a grocery business with the
LEN MAY
Cash P10M P20M
Accounts Receivable 20M 30M
Inventories 70M 40M
Property, Plant and Equipment 50M 10M
Accounts Payable 40M 20M
Notes Payable 30M (10%) 50M (5%)
Capital 80M 30M
LYCEUM OF SUBIC BAY
Subic Bay Freeport Zone
Advanced Financial Accounting Review Allan B. Santos CPA
3 | P a g e
The following additional notes are provided:
a. Len and May will contribute all its assets and liabilities to the newly formed partnership.
b. The parties agree to provide 10% and 20% allowance for
Len and May, respectively.
c. The inventories of LEN and MAY are reported at historical cost and have net realizable value of
P60M and P45M, respectively.
d. The PPE of LEN and MAY have not been depreciated and should be depreciated by 40% and 30%,
respectively.
e. The interest payable on both notes payable were unrecorded and unpaid since the date of contract.
LEN’s note payable is dated April 1, 2016 while MAY’s note payable is dated June 30, 2016.
f. Nancy shall have 20% interest in the partnership upon contribution of sufficient cash.
What is the amount of cash to be contributed by Nancy on January 1, 2017?
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