The partnership of Add and Bal is adding a new partner, Cat, and its assets and equities at book value and fair value just prior to her admission to the partnership on January 1, 2011, are as follows:
| Book Value | Fair Value |
Assets |
|
|
Cash | $15,000 | $15,000 |
Accounts receivable—net | 45,000 | 40,000 |
Inventories | 50,000 | 60,000 |
Plant assets—net | 90,000 | 105,000 |
| $200,000 | $220,000 |
Equities |
|
|
Accounts payable | $30,000 | $30,000 |
15% note payable | 50,000 | 40,000 |
Add capital (60%) | 64,000 |
|
Bal capital (40%) | 56,000 |
|
| $200,000 |
|
On January 2, 2011, Add and Bal take Cat into the partnership of Add, Bal, and Cat for a 40 percent interest in capital and profits.
REQUIRED
1. Prepare journal entries for the admission of Cat into the partnership for an investment of $150,000 assuming that assets (including any goodwill) are revalued.
2. Prepare a balance sheet for the Add, Bal, and Cat partnership on January 2, 2011, just after the admission of Cat.
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