Concept explainers
1.
Record
1.
Answer to Problem 4PA
The journal entries as of June 30 is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
June | 30 | Asset Revaluations | $2,900 | |
Accounts Receivable | $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)
Explanation of Solution
Working Note 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
Working Note 2:
Calculation of Merchandise Inventory-
Book value of Merchandise Inventory = $72,000
Revalued Merchandise Inventory = $76,600
Working Note 3:
Calculation of Equipment-
Book value of Merchandise Inventory = $180,500
Revalued Merchandise Inventory = $155,700
Working Note 4:
Calculation of Revaluation Profit –
2.
Record the additional journal entries for the entrance of partner A into the Partnership.
2.
Explanation of Solution
The additional journal entries for the entrance of partner A into the Partnership is as follows:
Date | Account Titles and Explanation | Debit ($) | 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 balance sheet for the new partnership as of July 1, 20Y7.
3.
Answer to Problem 4PA
The balance sheet for the new partnership as of July 1, 20Y7 is as follows.
M, H, and A | |||
Balance Sheet | |||
July 1, 20Y7 | |||
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)
Explanation of Solution
Working Note 5:
Calculation of Cash Balance –
Working Note 6:
Calculation of Capital Balance of M–
Working Note 7:
Calculation of Capital Balance of H–
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