Question
MARIAH, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting CAREY to join
MARIAH, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting CAREY to join her and formed a partnership on April 1, 2020. Just before admission, MARIAH had the following assets and liability accounts: Cash - 420,000; Accounts receivable -380,000; Inventories -250,000;Notes payable -100,000. CAREY agreed to contribute cash equal to 30% of MARIAH'S capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance.
Question:
How much is the adjusted capital of MARIAH?
How much should CAREY contribute to the partnership?
How much is the total assets of the partnership after the formation?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
