Musa Moshref and Shaniqua Hollins have operated a successful firm for many years, sharing net income and net losses equally. Taylor Anderson is to be admitted to the partnership on July 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 June 30, except for the following:?Accounts receivable amounting to $2,500 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 $76,600.?Equipment is to be valued at $155,700.

b.Anderson is to purchase $70,000 of the ownership interest of Hollins for $75,000 cash and to contribute another $45,000 cash to the partnership for a total ownership equity of $115,000.

The post-closing trial balance of Moshref and Hollins as of June 30 is as follows:

Moshref and Hollins

POST-CLOSING TRIAL BALANCE

June 30, 20Y7

ACCOUNT TITLE DEBIT CREDIT 1 Cash 8,000.00 2 Accounts Receivable 42,500.00 3 Allowance for Doubtful Accounts 1,600.00 4 Merchandise Inventory 72,000.00 5 Prepaid Insurance 3,000.00 6 Equipment 180,500.00 7 Accumulated Depreciation-Equipment 43,100.00 8 Accounts Payable 21,300.00 9 Notes Payable (current) 35,000.00 10Musa Moshref, Capital 120,000.00 11 Shaniqua Hollins, Capital 85,000.00 12 Totals 306,000.00306,000.00