
Concept explainers
1.
It is that form of organization which is owned and managed by two or more persons who invest and share the
To record: The
1.

Answer to Problem 12.4BPR
The journal entries as of August 31 is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
Aug. | 31 | Asset Revaluations | $1,800 | |
|
$1,500 | |||
Allowance for Doubtful Accounts (1) | $300 | |||
(To record the loss on revaluation of assets.) | ||||
31 | Merchandise Inventory | $4,300 | ||
Asset Revaluations (2) | $4,300 | |||
(To record the profit on revaluation of merchandise inventory.) | ||||
31 | $15,500 | |||
Equipment (3) | $3,000 | |||
Asset Revaluations | $12,500 | |||
(To record the profit on revaluation of equipment.) | ||||
31 | Asset Revaluations (Revaluation profit) (4) | $15,000 | ||
C, Capital (1/2) | $7,500 | |||
E, Capital (1/2) | $7,500 | |||
(To record the division of revaluation profit between Partner C and E.) |
Table (1)
Explanation of Solution
Working Notes:
Calculation of Allowances for Doubtful Accounts –
Allowance for doubtful debt is to be increased to 5% of the remaining account.
Old Balance = $600
Calculation of Merchandise Inventory-
Book value of Merchandise Inventory = $42,500
Revalued Merchandise Inventory = $46,800
Calculation of Equipment-
Book value of Merchandise Inventory = $64,500
Revalued Merchandise Inventory = $67,500
Calculation of Revaluation Profit –
2.
To record: The additional journal entries for the entrance of partner M into the Partnership.
2.

Explanation of Solution
The additional journal entries for the entrance of partner M into the Partnership is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
Sep | 1 | E, Capital | $26,000 | |
M, Capital | $26,000 | |||
(To record the purchase of 26,000 of ownership interest of partner E, by partner M.) | ||||
1 | Cash | $32,000 | ||
M, Capital | $32,000 | |||
(To record the cash brought by partner M to the partnership firm.) |
Table (2)
3.
To prepare: The
3.

Answer to Problem 12.4BPR
The balance sheet for the new partnership as of September 1, 2016 is as follows.
C, E, and M | |||
Balance Sheet | |||
September 1, 2016 | |||
Assets | |||
Current assets: | |||
Cash (5) | $44,300 | ||
Accounts receivable | $18,000 | ||
Less allowance for doubtful accounts | $900 | $17,100 | |
Merchandise inventory | $46,800 | ||
Prepaid insurance | $1,200 | ||
Total current assets | $109,400 | ||
Property, plant, and equipment: | |||
Equipment | $64,500 | ||
Total assets | $173,900 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | $8,900 | ||
Notes payable | $15,000 | ||
Total liabilities | $23,900 | ||
Partners’ Equity | |||
C, capital (6) | $62,500 | ||
E, capital (7) | $29,500 | ||
M, capital | $58,000 | ||
Total partners’ equity | $150,000 | ||
Total liabilities and partners’ equity | $173,900 |
Table (3)
Explanation of Solution
Working Notes:
Calculation of Cash Balance –
Calculation of Capital Balance of C –
Calculation of Capital Balance of E–
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