The balance sheet of Adams Pharmacy after the revenue, expense, and partners' drawing accounts have been closed on December 31, 2016, follows:

On that date, Larry Adams, Hazel Adams, and Isiah Adams agree to admit Vickie Neal to the partnership. The partnership agreement provides that, in case of dissolution of the partnership, all assets and liabilities should be revalued. Profits and losses are shared in the ratio of 50:25:25, to Larry, Hazel, and Isiah, respectively. The agreed upon values of the assets are as follows:
Accounts receivable ....................... $ 15,000
Merchandise inventory .................... 408,400
Equipment .................................... 73,000
Building .................................... $139,000
Land .......................................... 103,000
All liabilities are properly recorded.
Instructions
1. Prepare the general journal entries to record revaluation of the assets.
2. Prepare the general journal entry (or entries) to record Vickie Neal's investment of $120,000, assuming that she is to receive capital equal to the amount invested.
3. Prepare the general journal entry (or entries) to record Vickie Neal's investment of $120,000, assuming that she is to receive one-fifth of the capital of the partnership.
4. Prepare the general journal entry (or entries) to record Vickie Neal's investment of $120,000, assuming that she is to receive one-third of the capital of the partnership.
5. Assume that after the revaluation had been recorded, the existing partners and Vickie Neal decided that their previous agreement should be canceled and that Vickie Neal should not become a partner. Instead, the partners agreed that Hazel Adams would withdraw from the partnership and be paid cash by the partnership.
a. Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to her capital account balance after the revaluation.
b. Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $15,000 less than her capital account balance after revaluation.
c. Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $12,600 more than her capital account balance after revaluation.
Analyze: Assume that only items 1 and 3 have been recorded in the records of the partnership. What is the balance of Isiah Adams's capital account at January 1, 2017?

Transcribed Image Text:

Adams Pharma Balance Sheet December 31, 2016 1700000 Accounts Receivable Merchandise Inventory Equipment Accumulated Depreciation-Equipment Building Accumulated Depreciation-Building Land Total Assets 174 0 U 00 101101010100 4201 이 이 이 00 330 000 00 73 000 00 90 00000 50000 00 748 400 00 Liabilities and Partners Equity Liabilities Accounts Payable Taxes Payable Total Liabilities 415 2 00 00 23 2 00 00 438 | 4 | 00| 00 Partners Equity Larry Adams, Capital Hazel Adams, Capital Isiah Adams, Capital Total Partners Equity Total Liabilities and Partners' Equity 170 00000 70 000 00 70 000 00 310 000 00 48 40000