Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays is to be admitted to the partnership on September 1 of the current year, in accordance with the following agreement: a. Assets and liabilities of the old partnership are to be valued at their book values as of August 31, except for the following: • Accounts receivable amounting to $1,500 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts. • Merchandise inventory is to be valued at $46,800. • Equipment is to be valued at $64,500. b. Mays is to purchase $26,000 of the ownership interest of Estrada for $30,000 cash and to contribute $32,000 cash to the partnership for a total ownership equity of $58,000. The post-closing trial balance of Caldwell and Estrada as of August 31 follows: Caldwell and Estrada Post-Closing Trial Balance August 31, 20Y9 Debit Balances Credit Balances Cash 12,300 Accounts Receivable 19,500 Allowance for Doubtful Accounts 600 Merchandise Inventory Prepaid Insurance Equipment Accumulated Depreciation-Equipment Accounts Payable Notes Payable (current) Brian Caldwell, Capital Adriana Estrada, Capital 42,500 1,200 67,500 15,500 8,900 15,000 55,000 48,000 143,000 143,000 Instructions 1. Journalize the entries as of August 31 to record the revaluations, using a temporary account entitled Asset Revaluations. Debits and credits to the Asset Revaluation account are losses and gains from revaluation, respectively. The balance in the accumulated depreciation account is to be eliminated. After journalizing the revaluations, close the balance of the asset revaluations account to the capital accounts of Brian Caldwell and Adriana Estrada. 2. Journalize the additional entries to record Mays' entrance to the partnership on September 1, 20Y9. 3. Present a balance sheet for the new partnership as of September 1, 20Y9.
Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays is to be admitted to the partnership on September 1 of the current year, in accordance with the following agreement: a. Assets and liabilities of the old partnership are to be valued at their book values as of August 31, except for the following: • Accounts receivable amounting to $1,500 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts. • Merchandise inventory is to be valued at $46,800. • Equipment is to be valued at $64,500. b. Mays is to purchase $26,000 of the ownership interest of Estrada for $30,000 cash and to contribute $32,000 cash to the partnership for a total ownership equity of $58,000. The post-closing trial balance of Caldwell and Estrada as of August 31 follows: Caldwell and Estrada Post-Closing Trial Balance August 31, 20Y9 Debit Balances Credit Balances Cash 12,300 Accounts Receivable 19,500 Allowance for Doubtful Accounts 600 Merchandise Inventory Prepaid Insurance Equipment Accumulated Depreciation-Equipment Accounts Payable Notes Payable (current) Brian Caldwell, Capital Adriana Estrada, Capital 42,500 1,200 67,500 15,500 8,900 15,000 55,000 48,000 143,000 143,000 Instructions 1. Journalize the entries as of August 31 to record the revaluations, using a temporary account entitled Asset Revaluations. Debits and credits to the Asset Revaluation account are losses and gains from revaluation, respectively. The balance in the accumulated depreciation account is to be eliminated. After journalizing the revaluations, close the balance of the asset revaluations account to the capital accounts of Brian Caldwell and Adriana Estrada. 2. Journalize the additional entries to record Mays' entrance to the partnership on September 1, 20Y9. 3. Present a balance sheet for the new partnership as of September 1, 20Y9.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter12: Accounting For Partnerships And Limited Liability Companies
Section: Chapter Questions
Problem 4PB
Related questions
Question
Transcribed Image Text:Brian Caldwell and Adriana Estrada have operated a successful firm for many years,
sharing net income and net losses equally. Kris Mays is to be admitted to the partnership
on September 1 of the current year, in accordance with the following agreement:
a. Assets and liabilities of the old partnership are to be valued at their book values as
of August 31, except for the following:
• Accounts receivable amounting to $1,500 are to be written off, and the allowance
for doubtful accounts is to be increased to 5% of the remaining accounts.
• Merchandise inventory is to be valued at $46,800.
• Equipment is to be valued at $64,500.
b. Mays is to purchase $26,000 of the ownership interest of Estrada for $30,000 cash and
to contribute $32,000 cash to the partnership for a total ownership equity of $58,000.
The post-closing trial balance of Caldwell and Estrada as of August 31 follows:
Caldwell and Estrada
Post-Closing Trial Balance
August 31, 20Y9
Debit
Balances
Credit
Balances
Cash
12,300
Accounts Receivable
19,500
Allowance for Doubtful Accounts
600
Merchandise Inventory
Prepaid Insurance
Equipment
Accumulated Depreciation-Equipment
Accounts Payable
Notes Payable (current)
Brian Caldwell, Capital
Adriana Estrada, Capital
42,500
1,200
67,500
15,500
8,900
15,000
55,000
48,000
143,000
143,000
Instructions
1. Journalize the entries as of August 31 to record the revaluations, using a temporary
account entitled Asset Revaluations. Debits and credits to the Asset Revaluation account
are losses and gains from revaluation, respectively. The balance in the accumulated
depreciation account is to be eliminated. After journalizing the revaluations, close the
balance of the asset revaluations account to the capital accounts of Brian Caldwell and
Adriana Estrada.
2. Journalize the additional entries to record Mays' entrance to the partnership on
September 1, 20Y9.
3. Present a balance sheet for the new partnership as of September 1, 20Y9.
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