Question
Admitting New Partner Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays
Admitting New Partner
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:
- 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 $2,800 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 $74,200.
- Equipment is to be valued at $171,600.
- Mays is to purchase $70,000 of the ownership interest of Estrada for $76,000 cash and to contribute $38,000 cash to the partnership for a total ownership equity of $108,000.
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 | 7,400 | ||
| Accounts Receivable | 45,200 | ||
| Allowance for Doubtful Accounts | 1,600 | ||
| Merchandise Inventory | 69,300 | ||
| Prepaid Insurance | 2,500 | ||
| Equipment | 199,000 | ||
| Accumulated DepreciationEquipment | 61,700 | ||
| Accounts Payable | 17,900 | ||
| Notes Payable (current) | 46,200 | ||
| Brian Caldwell, Capital | 105,000 | ||
| Adriana Estrada, Capital | 91,000 | ||
| 323,400 | 323,400 | ||
Required:
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 revaluations 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. If an amount box does not require an entry, leave it blank.
| Aug. 31-Accounts Receivable | fill in the blank 908d44041fe7fdb_2 | fill in the blank 908d44041fe7fdb_3 | |
| fill in the blank 908d44041fe7fdb_5 | fill in the blank 908d44041fe7fdb_6 | ||
| fill in the blank 908d44041fe7fdb_8 | fill in the blank 908d44041fe7fdb_9 | ||
| Aug. 31-Merchandise Inventory | fill in the blank 908d44041fe7fdb_11 | fill in the blank 908d44041fe7fdb_12 | |
| fill in the blank 908d44041fe7fdb_14 | fill in the blank 908d44041fe7fdb_15 | ||
| Aug. 31-Equipment | fill in the blank 908d44041fe7fdb_17 | fill in the blank 908d44041fe7fdb_18 | |
| fill in the blank 908d44041fe7fdb_20 | fill in the blank 908d44041fe7fdb_21 | ||
| fill in the blank 908d44041fe7fdb_23 | fill in the blank 908d44041fe7fdb_24 | ||
| Aug. 31-Close | fill in the blank 908d44041fe7fdb_26 | fill in the blank 908d44041fe7fdb_27 | |
| fill in the blank 908d44041fe7fdb_29 | fill in the blank 908d44041fe7fdb_30 | ||
| fill in the blank 908d44041fe7fdb_32 | fill in the blank 908d44041fe7fdb_33 |
2. Journalize the additional entries to record Mays' entrance to the partnership on September 1, 20Y9. If an amount box does not require an entry, leave it blank.
| Sept. 1-Purchase capital | fill in the blank 18c303004fbf008_2 | fill in the blank 18c303004fbf008_3 | |
| fill in the blank 18c303004fbf008_5 | fill in the blank 18c303004fbf008_6 | ||
| Sept. 1-Contribute cash | fill in the blank 18c303004fbf008_8 | fill in the blank 18c303004fbf008_9 | |
| fill in the blank 18c303004fbf008_11 | fill in the blank 18c303004fbf008_12 |
3. Present a balance sheet for the new partnership as of September 1, 20Y9.
| Caldwell, Estrada, and Mays | |||
| Balance Sheet | |||
| September 1, 20Y9 | |||
| Assets | |||
| Current assets: | |||
| $fill in the blank c09f39fda01004b_2 | |||
| $fill in the blank c09f39fda01004b_4 | |||
| fill in the blank c09f39fda01004b_6 | fill in the blank c09f39fda01004b_7 | ||
| fill in the blank c09f39fda01004b_9 | |||
| fill in the blank c09f39fda01004b_11 | |||
| Total current assets | $fill in the blank c09f39fda01004b_12 | ||
| Property, plant, and equipment: | |||
| fill in the blank c09f39fda01004b_14 | |||
| Total assets | $fill in the blank c09f39fda01004b_15 | ||
| Liabilities | |||
| Current liabilities: | |||
| $fill in the blank c09f39fda01004b_17 | |||
| fill in the blank c09f39fda01004b_19 | |||
| Total liabilities | $fill in the blank c09f39fda01004b_20 | ||
| Partners' Equity | |||
| $fill in the blank c09f39fda01004b_22 | |||
| fill in the blank c09f39fda01004b_24 | |||
| fill in the blank c09f39fda01004b_26 | |||
| Total partners' equity | fill in the blank c09f39fda01004b_27 | ||
| Total liabilities and partners' equity | $fill in the blank c09f39fda01004b_28 | ||
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Canadian Income Taxation Planning And Decision Making
Authors: Joan Kitunen, William Buckwold
17th Edition 2014-2015 Version
1259094332, 978-1259094330
