Question
1 Prepare the journal entries to set up the partnership as at 1 May 2020. (4 marks) 2 prepare a classified Balance Sheet of the
1 Prepare the journal entries to set up the partnership as at 1 May 2020. (4 marks)
2 prepare a classified Balance Sheet of the partnership as at 1 May 2020. (5 marks)
Michelle and Peter form a partnership on 1 May 2020.
Michelle agrees to bring in $250,000 of cash.
Peter, who has been trading as a sole trader, is to invest certain business assets at agreed market valuations and also transfer his business liabilities.
Details of Peters assets and liabilities and their agreed valuations, are as follows:
| Book value | Market value |
| |||
| Cash | $30,000 | $30,000 |
| ||
| Accounts Receivable | $150,000 | $120,000 |
| ||
| Inventory | $82,000 | $76,000 |
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| Land | $150,000 | $200,000 |
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| Equipment | $45,000 | $24,000 |
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| Accounts payable | $40,000 | $40,000 |
| ||
| Loan payable (due 2040) | $50,000 | $50,000 |
| ||
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