Question

P12-1A The post-closing trial balances of two proprietorships on January 1, 2017, ar presented below. Sorensen Company Lucas Cr Dr. Dr. Cr. 14,000 17,500 12,000 26,000 Cash Accounts receivable Allowance for doubtful accounts Inventory Equipment Accumulated depreciation-equipment Notes payable Accounts payable Sorensen, capital Lucas, capital $ 3,000 Allowan $ 4,400 26,500 45,000 18,400 29,000 Equipm 24,000 18,000 22,000 36,000 11,000 15,000 31,000 The partn transactio 1. A total 2. Gain or 3. Liabiliti 4, P. Roper 5. Cash wa 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. Sorensen Company $17,500 4,500 28,000 25,000 Lucas Company $26,000 4,000 20,000 15,000 Accounts receivable Allowance for doubtful accounts Inventory Equipment (a) Prepare (b) Post to th (I) Prepa All cash will be transferred to the partnership, and the partnership will assume 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 C. Instructions (a) Prepare separate journal entries to record the transfer of each proprietorship's asseis 0,000 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, L the in

Answer 1

a)   Journal Entries

	1	Cash A/c Dr.	14,000	4500
		Accounts Receivable A/c Dr.	17,500	22000
		Equipment A/c Dr.	25,000	18000
		Inventory A/c Dr.	28,000	40000
		To Allowance for Doubtful debt A/c
		To Accounts Payable A/c
		To Notes Payable A/c
		To Sorensen Capital A/c
	2	Cash A/c Dr.	12000	4000
		Accounts Receivable A/c Dr.	26000	31000
		Equipment A/c Dr.	15000	15000
		Inventory A/c Dr.	20000	23000
		To Allowance for Doubtful debt A/c
		To Accounts Payable A/c
		To Notes Payable A/c

NOTE:- Entry (1) pertain to transfer of assets and liabilities of Sorenson proprietorship business to new partnership.
Entry:2) pertain to transfer of assets and liabilities of Lucas proprietorship business to new partnership.   

Question b) Journal Entries relating to additional cash investment by Sorensen and Lucas:-

Transactions	Particulars	Debit(Dr.)	Credit(Cr.)
i) Cash investment by Sorensen.	Cash A/c Dr. To Sorenson Capital A/c	5000	5000
i) Cash investment by Lucas.	Cash A/c Dr. To Lucas Capital A/c	19000	19000

c) Balance Sheet as on January 1, 2017

Liabilities	Amount ($)	Assets	Amount ($)
Capital A/c Payable Note Payable	87000 53000 33000	Cash (19000 + 5000 + 14000 + 12000) Receivables (17500 + 26000 - 4500 - 4000) Inventory (20000 + 28000) Equipment (25000 + 15000)	50000 35000 48000 40000
Total	173000	Total	173000

Calculation of capital amount in the balance sheet = 40000 + 23000 + 5000 + 19000 = $ 87000.