Question

P12-1A The post-closing trial balances of two proprietorships on January 1, 2017, are presented below. Sorensen Company Lucas Company Cr. Cr. Dr. $12,000 26,000 Cash Accounts receivable Allowance for doubtful accounts Inventory Equipment Accumulated depreciation-equipment Notes payable Accounts payable Sorensen, capital Lucas, capital S 14,000 17,500 $ 3,000 s 4,400 26,500 45,000 18,400 29,000 24,000 18,000 22,000 36,000 15,000 31,000 24,000 $103,000 $103,000 $85,400$85,400 Sorensen and Lucas decide to form a partnership, Solu Company, with the following agreed upon valuations for noncash assets Lucas Company $26,000 4,000 20,000 15,000 Sorensen Compan Accounts receivable Allowance for doubtful accounts Inventory Equipment $17,500 4,500 28,000 25,000 All cash will be transferred to the partnership, and the partnership will assume all the liabilities of the two proprietorships. Further, it is agreed that Sorensen will invest an additional $5,000 in cash, and Lucas will invest an additional $19,000 in rash Instructions (a) Prepare separate journal entries to record the transfer of each proprietorships assets and liabilities to the partnership (b) Journalize the additional cash investment by each partner (c) Prepare a classified balance sheet for the partnership on January 1,2017.

Answer 1

Solution:-

(a). Below are the journal entries to record the transfer of each proprietorship's assets and liabilities to the partnership (Solu Company) -
Journal of Solu Company Date of Entry Particulars Different Assets and Liabilities of Sorensen Company taken over at their respective agreed values as per scheme of Partnership January 1, 2017 Debit Credit Cash Accounts Receivable Inventory Equipment $14,000 $ 17,500 $ 28,000 $ 25,000 To Allowance for Doubtful Accounts To Notes Payable To Accounts Payable To Sorensen Capital $4,500 $ 18,000 $ 22,000 $ 40,000 Different Assets and Liabilities of Lucas Company taken over at their respective agreed values as per scheme of Partnership January 1, 2017 Cash Accounts Receivable Inventory Equipment $ 12,000 $ 26,000 $ 20,000 $ 15,000 To Allowance for Doubtful Accounts To Notes Payable To Accounts Payable To Lucas Capital 4,000 $ 15,000 $31,000 $ 23,000

(b). Below are the journal entries to record the additional cash invested by each partner -(c). Classified Balance Sheet for the Partnership as on January 1, 2017 -