Jae Xu and Bob Lyle have operated a sports equipment company, X-L Sports, for a number of years as partners sharing net incomes and gains in a 3 to 2 ratio. Because the business is growing, the two partners entered into an agreement with Tom Celic to reorganize their firm into a corporation. The charter of the new corporation, X-L Sports, Inc., authorizes the corporation to issue 75,000 shares of \(\$ 10\) par value common stock. On the date of the reorganization, August 15, 1990, a trial balance of the partnership ledger appears as follows:

The agreement between the partners and Celic carries these provisions:
1. The partnership assets are to be revalued as follows:
\(a\). The \(\$ 2,250\) account receivable of Blue Tigers is known to be uncollectible and is to be written off as a bad debt.

b. After writing off the Blue Tigers account, the allowance for doubtful accounts is to be increased to \(4 \%\) of the remaining accounts receivable.

c. The merchandise inventory is to be written down to \(\$ 285,000\) to allow for damaged and shopworn goods.

d. Insufficient depreciation has been taken on the store equipment. Therefore, its book value is to be decreased to \(\$ 48,750\) by increasing the balance of the accumulated depreciation account.

e. The building is to be written up to its replacement cost, \(\$ 487,500\), and the balance of the accumulated depreciation account is to be increased to show the building to be one-fifth depreciated.
2. After the partnership assets are revalued, the assets and liabilities are to be transferred to the corporation in exchange for its stock, with each partner accepting stock at par value for his equity in the partnership.
3. Tom Celic is to buy any remaining authorized stock for cash at par value.
After reaching the agreement outlined, the three principals hired you as accountant for the new corporation. Your first task is to determine the amount of stock each person should receive, and to prepare entries on the corporation's books to record the issuance of stock in exchange for the partnership assets and liabilities and the issuance of stock to Celic for cash. In addition, prepare a balance sheet for the corporation as it should appear after all its stock is issued.

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X-L SPORTS Trial Balance August 15, 1990 Cash $ 38,255 Accounts receivable 69,750 Allowance for doubtful accounts $ 2,625 Merchandise inventory 316,875 Store equipment 73,500 Accumulated depreciation, store equipment. 15,750 Buildings 375,000 Accumulated depreciation, buildings 75,000 Land.. 93,750 Accounts payable 41,625 Notes payable. 262,500 Jae Xu, capital. Bob Lyle, capital. Totals. 339,380 230,250 $967,130 $967,130