Two Sole Proprietors Form a Partnership
SECTION: SCORE: PROFESSOR: Problem $\# 9$ Two Sole Proprietors Form a Partnership Medina and Loqueloque are fierce competitors who sell hunting equipment. They finally decided to join forces in order to increase their business and reduce costs. An agreement is reached between the two to begin operations as a partnership on Mar. 1, 2019. Medina and Loqueloque have decided to share profits or losses in the ratio of $60 ; 40$. respectively. The statements of financial position of Medina and Loqueloque as at Mar. 1, 2019 are as follows:

The name of the partnership will be Medina and Loqueloque Hunting Gears. The partners have agreed to effect the following adjustments: a. Medina's merchandise inventory is to be reduced by $P 105,200$. The inventory of Loqueloque will be increased by P7, 200. b. The following are the fair market values of the various assets: $\begin{array}{lrc} & \text { Medina } & \text { Loqueloque } \\ \text { Land } & P 108,000 & - \\ \text { Building } & 192,000 & - \\ \text { Office Equipment } & 16,000 & \text { P40,000 } \\ \text { Repair Equipment } & 124,000 & -\end{array}$ c. One-half of the notes payable of Medina are personal notes. All other liabilities of the partners are assumed by the partnership. d. The prepaid rent in the books of Loqueloque will be consumed by the partnership. Required: Prepare the journal entries to record the formation of the partnership.

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