[Music] plus our topic for today is accounting for partnership remember that in a partnership there are four major stages number one is formation when you establish a partnership number two is operation this is when you allocate profits and losses to the partners number three is dissolution there is a dissolution when a reduces a change in the ownership interest in the partnership but if you solve your partnership when you admit admission of a new partner or when the reserve withdrawal or retirement of an existing partner in the last stages liquidation stop now your operations of partnership terminated now there's two types of liquidation lump sum and installment liquidation alright I have four separate videos for each of this for now let's focus on formation of partnership along button during formation is that we measure the assets and liabilities of the partnership at fair market value assets less liabilities we know the habit of balances of the partners the total capital of the partnership your information we measure the assets and liabilities at fair market value okay I'll give you more details as we answer our problems for today hey let's go to problem number one issue in C class major muhabba um problem number one and in the question of a multiple choice you're approaching a green color for the first problems in the modem multiple choices so that I can expound on the concepts there in succeeding problems make choices now and we know in the CPI boards the man that yummy choices all right okay if muhabba in problem and technique known as you read first of questions okay Pericles maka idea ha Kuan Yew my relevant information once you start going through the given ok so let's look at the questions question a upon the formation of the partnership how much is the capital of pinochle and begin how are respectively question B assuming that the capital balances are to be equal to the PNL ratio how much the hospital of pinochle and McGinn haba respectively letter C compute for the total assets of the partnership okay so basically the at an entire how much your capital balances and the total assets of the partnership all right we can read the problem okay FINA fell and McGinn hawa decided to form a partnership on March 15 2019 whenever Mahadevan indeed in the problem underlined mahasaya amalgam is not in our solution and you should be maha trick sadita so under them Jabbar and O'Malley motor their statements of financial position on this date were obedient item by the sheet for partner interval and balance sheet for partner Mogan hawa so we have assets cash house receivable inventory equipment and we have the diabetes in capital accounts payable pinochle capital McGinn hawa apical right whenever Bennigan's we can turn on balance sheets during formation you assume that these are at book values okay when you say book values historical cost an alright and we know younggu not an your information like what i mentioned earlier is to convert the book values into fair market values gets all right let's continue reading the problem they agree the following adjustments shall be a bullet one equipment of pfl is under depreciated and that McGinn hawa is over depreciated buda - and i was for doubtful the house is to be set up amounting to two nine seven fourteen of l1 and sixth form again hawa inventory's of twenty one eight seven five and fifteen three one two are worthless in the books of pinochle and maggot how are respectively the partnership agreement provides for a profit and loss ratio of 72 penal and thirty-two begin hawa okay so if you analyze the problem I'm bidding a certain balance sheets of the two partners we are submitted these are at book values and then marrow adjustments so ungodly not a we will restate the assets and liabilities we will convert from book values to fair market values by reflecting your adjustments theta all right pero take note class now if I just move you assets and liabilities it's the same thing as adjusting the capital balances of the partner since assets minus liabilities is equal to the hospital all right and God doing coup d'etat let's start off with the capital balances with the partners for pinochle it's to six to five thousand four Medina wise to zero five six 250 all right so going to a good solution Janice I'll put first capital balance of Pina fell here all right and for Maggie inhale here okay I'll put here and adjusted capital balance or and adjusted when in canto to six to five thousand I'll copy here to six to five thousand and then form again hawa it's 2:05 six to 5205 six 250 all right Scott on vertical on top from book values into fair market values you can happen in my adjustments let's go to the first bullet equipment of pinochle is under depreciated by 87 500 okay under depreciated meaning cool answer depreciation if you look at the balance sheet the little attempt when I present to equipment equipment less accumulated depreciation you have the book value of the equipment now if this is under depreciated be CBN you accumulated depreciation Hutton is understated so you book value of the equipment will be overstated find amico correctly know that was Boaz a naughty new book value of the equipment right if my blossomy own asset the new effect near to the capital is also decrease so the gain having dito first adjustment is minus eighty seven thousand five hundred all right because Class D value assets less liability is equal to capital but Catemaco assets that's from capital but imagine diabilities followed by on capital to make the equation always balance right in this case since banaba by not a new asset since it's under depreciated boomer - $87,500 for pinnable that's okay let's continue and that McGinn hawa is over depreciated by 1 3 1 250 if it's over depreciated over state that you accumulated depreciation therefore the book value is understated how do we correct that well caolan80 pass your book value so we increase the asset we increase the capital adjustment for McGinn highways plus 1 3 1 250 all right let's adjustment number 1 let's go to adjustment number 2 and I was for doubtful accounts is to be set up amounting to two nine seven five hundred for Pina health and one nine six eight seventy five former Gonzaga Serena biome allowance for doubtful accounts if you look at the balance sheet you need to shop in a person you have an accounts receivable less allowance for doubtful accounts you get the book value of the accounts receivable now if machs you set up gonna allowance for doubtful accounts you normal balance is a negative balance okay vamos a set up cut the effect will be to decrease the book value of your accounts receivable you efficacy epital will be a decrease all right that's why your adjustment number to not end will be minus two nine seven five hundred for pinnacle and - 196 875 for Megan hawa all right let's go to bullet number three inventory's of 21 875 and 15 three one two are worthless in the books of pinochle and Maggie how are respectively before testing inventories we have to write them off Bubba Watson up in your assets therefore I just met number three is minus 21 875 and minus 15 3 1 2 okay let's go to bullet number 4 the partnership agreement provides for a profit and loss ratio of 72 P novel and 30% imagine how a certain profit and loss ratio or P&L ratio this is the ratio that you use to allocate profits and losses to the partners but not operate the in partnership in this case since our stock plan on partnership this is upon the formation of the partnership in people certain relevant Hume profit and loss ratio for an out by the Marathi industry guardian Buddha number four alright so basically Marin PI on three adjustments to the capital balances of the partners now we can compute for the adjusted balances hey get your calculators calculator Natyam - all right so the started benefit to six to five thousand minus eighty seventy five minus two nine seven five hundred s 21 eight seven five the adjusted balance for P&L is two to one eight one to five mice with a 2 1 a 2 2 1 8 1 to 5 let's compute the adjusted balance for partner Maggie hawa 2 0 5 6 2 50 plus 1 3 1 250 minus 1 9 6 8 7 5 minus 15 3 1 2 just a capital balance for partner Maggie Nava is one and seventy five three one three okay I'll write it down one 975 three one three okay so these are the adjusted capital balances or vendor a nap in Sabina this is the fair market value of your assets lesser diabilities okay alright so question a how upon formation the partnership how much the capital of pinochle in McGinn however respectively final answers right down for peanut oil it's 2 2 1 8 1 2 5 2 2 1 8 1 2 5 4 partner begin hawa it's one 975 one and seventy five three one three all right these are your final answers for question a let's go to question B assuming that the capital balances are to be equal to the P&L ratio how much is the capital of Pinnacle and Medina hava respectively okay very important if silent in problem come on you in Investment Partners even you may in capital balance Estela right like what we did for question a for a question be explicit consisting Obinna your capital balance who balances will be equal to their PNL ratio if in dissemination sub-problem omega vijnana let's say bullet number for the nomination a 70/30 if once in have been a equal to p another issue your habitat balances that don't do it okay question B is very explicit pea nothing convenient otherwise wanna me Investment Partners that will be the initial capital balances okay let's answer question B so don't go go image answer jogging command engine is I'll get the total capital of the two partners partner pinochle 2 2 1 8 1 2 5 and partner McGinn hawa one nine seven two five three one three okay add two more named 11n to two one eight one two five plus one nine seven two five three one three you get four one nine three four three okay the equity tow four one nine three four three this is the total capital of the partnership now we need to reflect the P&L reach of 7373 t multiplied the knot in by 70% and by 30 percent so we have four one and three four three times point seven two nine three five four zero six let's uh make it four oh seven two nine three five 4:07 all right and then it's an amount 30% for one nine three four three eight times point three one nine one two five eight zero three one echo one two five eight zero three one all right assuming that the capital balances are to be equal to the ratio of how much is the capital of pinochle and Madine how are respectively final answers for partner Pina fail that's two nine three five four oh seven two nine three five four oh seven four McGinn halwa it's one two five eight zero three one one two five a zero three one okay so these are the final answers for question B question vision all right let's go to the last question compute for the total assets of the partnership total assets of the partnership now if you're asked to compute for the total assets automatic NASA good million is the fair market value of the assets of the partnership okay so I didn't get really hmm can we start at the assets in on the balance sheets of the partners yes spread it by the time mug start with 3:08 for 375 and three two one five six two five pair take note these are at book values okay cornbread pan attention to fair market value Sparrow presentation to be starting point all right let's put here assets of Pinnacle at Book value so happy not and 3:08 for 375 why not because I am given it here okay and then form again how about three two one five six two five okay maybe in however three two one five six two five all right now we know marineo adjustments neither we have three adjustments and actually the hakjin may affect the assets for example this one depreciation allowance for doubtful accounts inventories legend related to your assets but in Allen Nagar Warren Avenue adjustments to question a so ungodly not a legal and not a new six adjustments of the right sale at Ian may affect your assets okay let's go back to question see God denied an antigen Kappa : I just meant 187 501 3 1 250 okay +1 3 1 2 3 T I'm just copying I just made number 2 2 9 7 501 86 875 d2l again I just meant to two nine seven five hundred and one nine six eight seventy five one nine six 875 and I just meant number three two one eight seventy five and fifteen three one two 21 875 15 three one two basically class and you know up or down you know how values of the assets and I reflected the three adjustments to the assets to get the fair market value of the assets all right okay now calculate the fair market value of the assets okay 3:08 four three seven five plus three two one five six - five - 87 500 + 1 3 1 250 minus 297 500 - 1 9 6 8 7 5 just 2187 5i sorry - -21 8 7 5 - 15 3 1 - okay why the answer 5 bit 1 to 180 okay 5 8 1 2 1 8 8 okay this is your final answer for question C all right okay that's how you answer problem number one okay plus if you appreciate this free I have the tutorial don't forget to subscribe and turn on the notification bells so you get botta fide whenever I have a new video alright let's go to problem number two alright problem number two okay for problem number two major muhabba perineum V Navarro but this time we have choices right two questions and as usual and strategy natin is to read first the questions question number one how much is the adjusted capital balance or fitness of information question number two how much is the capital credit to health upon formation okay let's now read the problem on January 1 2020 okay health and fitness booth sole proprietors decided to form a partnership the US during review it's very important to take care of your health imagine last four to five months in intense review panel myopic are Elias if Miss rate card Eva I a class I suggest from time to time ugh exercise can actually pretty much a following workout program now sports or not in for today sir Brad Pitt sir Bradford the number one Fitness channel in the universe according to sir Brad visit the link in the description box below according to their agreement they will split profits and losses 75 is to 25 so this is their PNL ratio ok 75 to 25 again what is a P&L ratio will you use that to allocate profits and losses or income or losses to the partners and their initial capital will also reflect that ratio okay now class if indeed me mentioning the initial capital will also reflect that ratio in demagoguery no way that explicit sub problem now your reflect the initial capital to the PNL ratio before you do that the similar to problem 1 okay now the following our health and fitness statements of financial position as of December 31 29 T again we assume that these are at book values for partner health we have assets cash or inventory equipment a liability sounds payable expected expenses notes payable health capital 90,000 were also given the balance sheet of fitness the assets you have diabetes in capital actually not no need for you to recompute in totals cause in determine to auditing so most likely time item animal mm let's continue reading the values are reflected in the statement of financial position are already at fair values except for the following accounts okay since this is formation of partnership younggu is not an again is to convert these book values into fair market values according to the problem fair value Naja except for this all right Tiago be nuttin here a reflect not in your adjustments to convert book values into fair market values all right again rendering I think it just does nothing it's the capital balances of the partners let's start with partner health regular and ito partner health and then this one is partner Fitness okay for partner health its 90,000 capital for fitness term and its 160,000 alright let's put here an adjusted balances 90,000 and hundred sixty thousand okay for a fitness now let's continue reading the problem health accounts receivable is now twenty thousand less than what is stated in a statement of financial position lesson buy uniforms receivable knee health all right - this one hundred thousand shot and then holding here it's now twenty thousand less than okay so I just made nothing will be diagonal and Ito a house receivable for partner health minus twenty thousand okay for fitness with an among adjustment to the house receivable okay both inventories of health and fitness are now ninety thousand and seventy thousand respectively let's start with partner health Nancy health of the inventory is seventy-five a holding here 90,000 at OSHA so from 75 it's now ninety to increase off fifteen thousand I'll put here inventory then three okay plus fifteen thousand for partner help okay and seventy thousand offer partner fitness fitness inventory as eighty five thousand eighty five it's now 70 so decreased by fifteen thousand all right adjustment took partner Fitness minus fifteen thousand okay let's continue equipment for fitness has an assessed value of 275 thousand a priest value of 250 thousand and Book value of 200 thousand mmm we given three amounts here but we know that you relevant a mod for us is the fair market value of random didn't imagine I'd be called the new fair market value here we know we can disregard the book value was indicia relevant for us right your information it's now between assessed value and the priest value remember this class if being you given subproblem you choose a priest value okay this is more representative of the fair market value your priest value as a a name my independent appraisers the preparer appraisal reports so Union pinochle representative now of the fair market value you assessed value also usually anima BIR estimates rough estimates longhand so between the two you appraised value is more representative of the fair market value yes okay now this is for partner Fitness so compare in a pinch ah let's look at the equipment of partner fitness or this one okay three hundred thousand but don't forget you three hundred thousand and that's the cost of the equipment data key factor in with the new accumulated depreciation of one hundred three hundred minus one hundred two hundred thousand Book value 200 thousand it's now two hundred fifty to increase by 50 thousand dinkum a comedy for example continue pretty much the three hundred thousand and then it's now 250 so making analysis mode on to abandon fifty thousand know if you compare the book value 200 to 250 it's actually an increase of 50 thousand okay adjustment here the gig another equipment equipment for partner fitness plus 50,000 okay next additional accrued expenses are to be established in the amount of 10,000 for fitness while additional accounts payable in the amount of five thousand for health accrued expenses and accounts payable these are liabilities and according to our equation nap innovative earlier as his minus liabilities equal to hospital now param again balance equation since McGee increased own ten thousand and five dollars in liabilities unaffected but out lava biome hospital right there for adjustment not in here that start with accrued expenses for partner fitness Bobby on capital at minus ten thousand for fitness the other vitamin accounts payable five thousand so house payable by Bynum and five thousand your capital balance of partner health all right let's go to the last sentence it is also agreed that all the abilities will be assumed by the partnership what's the implication when you say all this would be assumed by the partial partnership it means that the liabilities in the books of the sole proprietors okay it carry over Scylla into the books of the partnership okay you're not sure in a heretical padishah in the books of the partnership except for the notes payable of fitness which will be personally paid by him okay except for the notes payable of fitness and sunburn fitness notes payable hundred thousand okay UHN 100,000 Oh bye-bye arancini fitness personally okay so Indian SMI carry over to the books of the partnership and in my implication to our solution well since next our table will be 160,000 capital etosha now when a tenant by deducting assets and liabilities no consider not in 100 right you can about bearing in in personally my partner Fitness Kalani and Buckner tisha to the hospital balance of partner fitness okay notes payable plus hundred thousand to partner Fitness okay we can now compute for the adjusted balances of the puppet advantage of the partners great they start with partner health ninety thousand unless twenty thousand plus 15 minus five thousand eighty thousand for partner health and in partner Fitness hundred sixty thousand des fifteen thousand plus fifty thousand minus ten plus one hundred thousand two hundred eighty five thousand two 85,000 okay these are the adjusted balances of the world capital balances of the partners okay we put in an alum in the first part of the problem the initial capital will also reflect the three show which is the 75 to 25 profit and loss ratio so not be nothing be paid to your final answer standin right Cal a patent giving 75 is 225 yeah so how do we do that okay I'll continue my solution here god-given communi logical muna you pop it on my partner health which is eighty thousand and the capital of partner Fitness which is to 85,000 Fitness to 85,000 et-plus to 85 365,000 okay God willing willing shell 75 be so 25 boy multiply not another 75% and 25% waist yeah let's compute three hundred sixty five thousand times point seventy five to seven three seven fifty write it down to seventy three seventy TV is for partner health ok and then the other one one three sixty five thousand times point twenty five ninety one 250 ninety-one 250 for partner fitness alright so and hope it another let's now so the questions how much is the just capital balance of fitness of information how much is the capital credit to health upon formation of a different human worthiness as you can see you is a habitable credit the other one is adjusted capital balance you know number two months ago Donathan how much is the hospital credit to health okay your answer mo dito should be the 273 750 as I ultimately enumerating capital credit of a the credit to partner health capital RA 273 750 final answer here is letter B to serenity serenity alright question one how much is the adjusted capital balance if you look at the choices you pay the more uncertain is the 91 250 which is letter A or the 285,000 has a choices disha it's either a or C now how do you answer this okay so hop eternity on questioning the pad is if in moraine and hawaiian gusto examiner nasa goodness a good code ito okay if i'm Goosen examiner is a good mode is the 91 to 50 top 1901 alanya wording is also happy to credit right but because avoiding Suginami adjusted capital balance it means miss a shammy bashang gusto answer which is in this case the 285,000 hey final answer is letter C 285,000 even Callaghan greenchem Gannavaram except in the CP Board Exam don't overanalyze do under analyze very envious because I and Anja a different human wording so that my yoga don't we my own Bustan examiner is a good cover question 1 & 4 question 2 that's all right class is the end of this free tutorial but the Impala man what if during partnership permission maybe mention about partial and total goodwill what if eventually incorporated partnership what would you do Deuteronomy Latvia in FL regardless of your housing background we will provide you with the most efficient and effective review by focusing on best review strategies key points to remember shortcuts common tricks and mistakes for reservation and to know more about us visit our website and Facebook page all the links are in the description below we serve now because we only accept a limited number of students in order to preserve the quality of our review process 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