Admitting New Partner
Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays is to be admitted to the partnership on September 1 of the current year, in accordance with the following agreement:
The post-closing trial balance of Caldwell and Estrada as of August 31 is as follows:
Caldwell and Estrada | |||
Post-Closing Trial Balance | |||
August 31, 20Y9 | |||
Debit Balances |
Credit Balances |
||
Cash | 5,700 | ||
Accounts Receivable | 35,200 | ||
Allowance for Doubtful Accounts | 1,400 | ||
Merchandise Inventory | 54,100 | ||
Prepaid Insurance | 2,000 | ||
Equipment | 149,000 | ||
Accumulated Depreciation—Equipment | 46,200 | ||
Accounts Payable | 9,300 | ||
Notes Payable (current) | 36,100 | ||
Brian Caldwell, Capital | 82,000 | ||
Adriana Estrada, Capital | 71,000 | ||
246,000 | 246,000 |
Required:
1. Journalize the entries as of August 31 to record the revaluations, using a temporary account entitled Asset Revaluations. Debits and credits to the Asset Revaluation account are losses and gains from revaluation, respectively. The balance in the accumulated depreciation account is to be eliminated. After journalizing the revaluations, close the balance of the asset revaluations account to the capital accounts of Brian Caldwell and Adriana Estrada.
For a compound transaction, if an amount box does not require an entry, leave it blank.
Aug. 31-Accounts Receivable | Asset Revaluations | ||
Accounts Receivable | |||
Allowance for Doubtful Accounts | |||
Aug. 31-Merchandise Inventory | Merchandise Inventory | ||
Asset Revaluations | |||
Aug. 31-Equipment | Accumulated Depreciation-Equipment | ||
Equipment | |||
Asset Revaluations | |||
Aug. 31-Close | Asset Revaluations | ||
Brian Caldwell, Capital | |||
Adriana Estrada, Capital |
2. Journalize the additional entries to record Mays's entrance to the partnership on September 1, 20Y9.
September 1-purchase | Adriana Estrada, Capital | ||
Kris Mays, Capital | |||
September 1-contribution | Cash | ||
Kris Mays, Capital |
3. Present a balance sheet for the new partnership as of September 1, 20Y9.
Caldwell, Estrada, and Mays | |||
Balance Sheet | |||
September 1, 20Y9 | |||
Assets | |||
Current assets: | |||
Cash | $ | ||
Accounts Receivable | $ | ||
Less Allowance for Doubtful Accounts | |||
Merchandise Inventory | |||
Prepaid Insurance | |||
Total current assets | $ | ||
Property, plant, and equipment: | |||
Equipment | |||
Total assets | $ | ||
Liabilities | |||
Current liabilities: | |||
Accounts Payable | $ | ||
Notes Payable | |||
Total liabilities | $ | ||
Partners' Equity | |||
Brian Caldwell, Capital | $ | ||
Adriana Estrada, Capital | |||
Kris Mays, Capital | |||
Total partners' equity | |||
Total liabilities and partners' equity | $ |
Refer the below images for the above asked questions in a detailed way of solution.
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