Problem 19.5A (Algo) Accounting for revaluation of assets and liabilities of a partnership, investment of a new partner, and withdrawal of a partner. LO 19-6, 19-8, 19-9The balance sheet of Adams Pharmacy after the revenue, expense, and partners’ drawing accounts have been closed on December 31, 20X1, follows: ADAMS PHARMACYBalance SheetDecember 31, 20X1Assets Cash $83,100 Accounts Receivable 16,700 Merchandise Inventory 430,500 Equipment$171,000 Accumulated Depreciation—Equipment99,500 71,500 Building414,000 Accumulated Depreciation—Building327,000 87,000 Land 47,000 Total Assets $735,800 Liabilities and Partners' Equity Liabilities Accounts Payable $411,900 Taxes Payable 22,900 Total Liabilities 434,800 Partners’ Equity Larry Adams, Capital$167,000 Hazel Adams, Capital67,000 Isiah Adams, Capital67,000 Total Partners’ Equity 301,000 Total Liabilities and Partners' Equity $735,800 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 Building $134,500 Merchandise inventory 405,400 Land 98,500 Equipment 71,500 All liabilities are properly recorded.Required:Prepare the general journal entries to record revaluation of the assets.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.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.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.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.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.Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $14,100 less than her capital account balance after revaluation.Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $11,700 more than her capital account balance after revaluation. Analyze:Assume that the assets have been revalued and that Vickie Neal has invested $120,000 in the partnership receiving one-fifth of the capital in the partnership. What is the balance of Isiah Adams’s capital account at January 1, 20X2? Analyze:Assume that the assets have been revalued and that Vickie Neal has invested $120,000 in the partnership receiving one-fifth of the capital inthe partnership. What is the balance of Isiah Adams's capital account at January 1, 20X2?Complete this question by entering your answer in the tabs below.Req 1 to 4Req 5AnalyzeAssume that the assets have been revalued and that Vickie Neal has invested $120,000 in the partnership receiving one-fifthof the capital in the partnership. What is the balance of Isiah Adams's capital account at January 1, 20X2?Capital account balance, January 1, 20X2< Req 5Analyze > Analyze:Assume that the assets have been revalued and that Vickie Neal has invested $120,000 in the partnership receiving one-fifth of the capitalthe partnership. What is the balance of Isiah Adams's capital account at January 1, 20X2?Complete this question by entering your answer in the tabs below.Req 1 to 4Reg 5AnalyzePrepare the general journal entries.View transaction listView journal entry worksheetNoTransactionsGeneral JournalDebitCredit1aHazel Adams, Capital86,500Cash2bHazel Adams, CapitalCashLarry Adams, CapitalIsiah Adams, Capital3Hazel Adams, CapitalIsiah Adams, CapitalLarry Adams, CapitalReq 1 to 4Analyze >

Answered: Prepare the general journal entries to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Problem 19.5A (Algo) Accounting for revaluation of assets and liabilities of a partnership, investment of a new partner, and withdrawal of a partner. LO 19-6, 19-8, 19-9

The balance sheet of Adams Pharmacy after the revenue, expense, and partners’ drawing accounts have been closed on December 31, 20X1, follows:

ADAMS PHARMACY
Balance Sheet
December 31, 20X1
Assets
Cash		$83,100
Accounts Receivable		16,700
Merchandise Inventory		430,500
Equipment	$171,000
Accumulated Depreciation—Equipment	99,500	71,500
Building	414,000
Accumulated Depreciation—Building	327,000	87,000
Land		47,000
Total Assets		$735,800
Liabilities and Partners' Equity
Liabilities
Accounts Payable		$411,900
Taxes Payable		22,900
Total Liabilities		434,800
Partners’ Equity
Larry Adams, Capital	$167,000
Hazel Adams, Capital	67,000
Isiah Adams, Capital	67,000
Total Partners’ Equity		301,000
Total Liabilities and Partners' Equity		$735,800

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	Building	$	134,500
Merchandise inventory		405,400	Land		98,500
Equipment		71,500

All liabilities are properly recorded.

Required:

Prepare the general journal entries to record revaluation of the assets.
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.
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.
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.

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.

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.
Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $14,100 less than her capital account balance after revaluation.
Prepare the general journal entry to record the payment to Hazel Adams if she is paid an amount equal to $11,700 more than her capital account balance after revaluation.

Analyze:
Assume that the assets have been revalued and that Vickie Neal has invested $120,000 in the partnership receiving one-fifth of the capital in the partnership. What is the balance of Isiah Adams’s capital account at January 1, 20X2?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution

Step 1

Larry Adams, Hazel Adams, and Isiah Adams are partners in the partnership firm and they agree to admit Vickie Neal in the partnership. At the time of admission of partner they decide to revalue the assets of the partnership. The profit or loss on such reevaluation is to be credited to the old partner's in their profit sharing ratio. Let us first calculate the revaluation profit.

Particulars	Book Value	Revalued amount	Increase/(Decrease)
Accounts receivable	16700	15000	(1700)
Building	87000	134500	47500
Merchandise inventory	430500	405400	(25100)
Land	47000	98500	41500
Equipment	71500	71500	0

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.