Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $20,900 in cash and merchandise inventory valued at $55,950.

On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $20,900 in cash and merchandise inventory valued at $55,950. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,390. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

The left hand column is Wallace's Ledger balance and the right hand column is the agreed-upon value.

Accounts Receivable $19,370 $18,480
Allowance for Doubtful Accounts 1,240 1,520
Equipment 83,050 54,330
Accumulated Depreciation 29,920
Accounts Payable 14,980 14,980
Notes Payable (current) 35,860 35,860

The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $22,800 (Keene) and $30,590 (Wallace), and the remainder equally.

Calculate the net asset value of each partner's initial investment in the newly formed firm. Show your work. Briefly explain your answer summarizing relevant GAAP.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Reporting Standards A Practical Guide

Authors: Hennie Van Greuning, Darrel Scott, Simonet Terblanche

6th Edition

0821384287, 978-0821384282

More Books

Students also viewed these Accounting questions