Question

blem 19.1A ctive 19-3 Accounting for formation of a partnership. Jack Tyler operates a store that sells computer software. Tyler has agreed to enter into a part- nership with Oliver Preston, effective January 1, 2019. The new firm will be called Global Computing. Tyler is to transfer all assets and liabilities of his firm to the partnership at the values agreed on. Preston will invest cash that is equal to 75 percent of Tyler's investment after revalu- ation. The accounts shown on Tyler's books and the agreed-on value of assets and liabilities are shown below. Value Balances Shown in Tyler's Records Agreed to by Partners $100,000 $100,000 $65,500 2,500 63,000 180,000 Assets Transferred Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Furniture and Equipment Accumulated Depreciation Total Assets Liabilities and Owner's Equity Transferred Accounts Payable Jack Tyler, Capital 56,000 187,500 50,000 70,000 30,000 40,000 $383,000 $393,500 35,000 $348,000 35,000 $358,500 INSTRUCTIONS 1. Prepare the general journal entries to record the following transactions in the books of the partnership on January 1, 2019: a. Receipt of Tyler's investment of assets and liabilities. b. Receipt of Preston's investment of cash. 2. Prepare a balance sheet for the partnership as of the beginning of its operations on January 1, 2019. Analyze: Based on the balance sheet you have prepared, what percentage (to the nearest 1/10 of 1%) of total equity is owned by Jack Tyler?

Answer 1

1.

a)

	Cash a/c Dr	100000
	Accounts Receivable a/c Dr	56000
	Merchandise Inventory Dr	187500
	Furniture and equipment Dr	50000
	To Accounts Payable a/c		35000
	To Jack Tyler Capital a/c		358500
	(Being assets and liabilties recorded at agreed value and balance transfered ti Jack Tyler capital a/c)

b)

	Cash a/c (358500*75%) Dr	268875
	To Preston Capital a/c		268875
	(Being cash worth 75% of Tyler's investment brought in by Preston)

2.Balance Sheet

Liabilities		Assets
Accounts Payable	35000	Cash (268875 + 100000)	368875
		Accounts Receivable	56000
Jack Tyler's capital a/c	358500	Merchandise Inventory	187500
Preston's capital a/c	268875	Furniture and Equipment	50000
Total	662375	Total	662375

3. Total equity: 662375 - 35000 = 627375. Jack Tyler's share: 358500/627375*100 = 54.12%

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