1.
Record the
1.
Explanation of Solution
The journal entries as of June 30 is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
June | 30 | Asset Revaluations | $2,900 | |
| $2,500 | |||
Allowance for Doubtful Accounts (1) | $400 | |||
(To record the loss on revaluation of assets.) | ||||
30 | Merchandise Inventory | $4,600 | ||
Asset Revaluations (2) | $4,600 | |||
(To record the profit on revaluation of merchandise inventory.) | ||||
30 | $43,100 | |||
Equipment (3) | $24,800 | |||
Asset Revaluations | $18,300 | |||
(To record the profit on revaluation of equipment.) | ||||
30 | Asset Revaluations (Revaluation profit) (4) | $20,000 | ||
M, Capital (1/2) | $10,000 | |||
H, Capital (1/2) | $10,000 | |||
(To record the division of revaluation profit between Partner M and H.) |
Table (1)
Working Notes:
(1)
Calculation of Allowances for Doubtful Accounts –
Allowance for doubtful debt is to be increased to 5% of the remaining account.
Old Balance = $1,600
(2)
Calculation of Merchandise Inventory-
Book value of Merchandise Inventory = $72,000
Revalued Merchandise Inventory = $76,600
(3)
Calculation of Equipment-
Book value of Merchandise Inventory = $180,500
Revalued Merchandise Inventory = $155,700
(4)
Calculation of Revaluation Profit –
2.
Record the additional journal entries for the entrance of partner A into the Partnership.
2.
Explanation of Solution
The additional journal entries for the entrance of partner A into the Partnership is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
July | 1 | H, Capital | $70,000 | |
A, Capital | $70,000 | |||
(To record the purchase of $70,000 of ownership interest of partner H, by partner A.) | ||||
1 | Cash | $45,000 | ||
A, Capital | $45,000 | |||
(To record the cash brought by partner A to the partnership firm.) |
Table (2)
3.
Prepare the
3.
Explanation of Solution
The balance sheet for the new partnership as of July 1, 2016 is as follows.
M, H, and A | |||
Balance Sheet | |||
July 1, 2016 | |||
Assets | |||
Current assets: | |||
Cash (5) | $53,000 | ||
Accounts receivable | $40,000 | ||
Less allowance for doubtful accounts | -$2,000 | $38,000 | |
Merchandise inventory | $76,600 | ||
Prepaid insurance | $3,000 | ||
Total current assets | $170,600 | ||
Property, plant, and equipment: | |||
Equipment | $155,700 | ||
Total assets | $326,300 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | $21,300 | ||
Notes payable | $35,000 | ||
Total liabilities | $56,300 | ||
Partners’ Equity | |||
M, capital (6) | $130,000 | ||
H, capital (7) | $25,000 | ||
A, capital | $115,000 | ||
Total partners’ equity | $270,000 | ||
Total liabilities and partners’ equity | $326,300 |
Table (2)
Working Notes:
(5)
Calculation of Cash Balance –
(6)
Calculation of Capital Balance of M–
(7)
Calculation of Capital Balance of H–
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Chapter 12 Solutions
Financial Accounting
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