Question

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment withassessed value of P100,000 with historical cost of P800,000 and accumulated depreciation of P600,000. A day after the partnership formation, the equipment was sold for P 300,000.B will contribute a land and building with carrying amount of P1,200,000 and fair value of P1,500,000.The land and building are subject to a mortgage payable amounting to P300,000 to be assumed by the partnership. The partners agreed that B will have 60% capital interest in the partnership. The partnersalso agreed that C will contribute sufficient cash to the partnership.1.What is the total agreed capitalization of the ABC Partnership?

Answer 1

In order to find the total agreed capitalization of the partnership, all we need are at least one partner's share %, and the amount of capital contributed by that partner. In the question, it is given that B will have 60% capital interest in the firm.

So we have B's capital share. All we need now is to value the capital contribution made by B.

Fair value of land and building = 1,500,000

(-) Mortgage payable = 300,000

Net Capital contributed by B = 1,500,000 - 300,000 = 1,200,000.

Total agreed capitalization of partnership = 1,200,000/60*100 = $ 2,000,000

Hope this helps :)