1. Ed and Frank form a partnership by combining the assets of their separate bus

Question

1.

Ed and Frank form a partnership by combining the assets of their separate business. Ed contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment price is to be priced at $70,000, that $2,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $1,500 is reasonable allowance for the un-collectability of the remaining accounts receivable. Frank contributes cash of $20,000 and merchandise inventory of $49,500. The partners agree that the merchandise inventory is to be priced at $51,000.

Journalize the entries to record in the partnership accounts (a) Ed’s investment and (b) Frank’s investment

2.

After discontinuing the ordinary business operations and closing the accounts if May 7, the ledger id the partnership of A, B, and C indicated the following:

Cash                            $   7,500

Noncash Assets         105,000

Liabilities                                                       $ 27,500

A, Capital                                                         45,000

B, Capital                                                          15,000

C, Capital                                                          25,000

                                    -----------                       ------------

                                    $112,500                    $112,500

The partners share net income and losses in the ration of 3:2:1. Between May 7-30, the noncash assets were sold for $120,000, the liabilities were paid, and the remaining cash was distributed to the partners. (a) Prepare a statement of partnership liquidation.

(b) Assume the same facts as in (a) except that the noncash assets were sold for $45,000 and any partner with a capital deficiency pays the amount of the deficiency to the partnership. Prepare a statement of partnership liquidation.

Explanation / Answer

1)

Particulars Dr.($) Cr.($) a) Accounts Receivable Dr. $ 47,500 Equipment Dr. $ 70,000 To Allowance for Doubtful Accounts Cr. $      1,500 To Ed Capital Cr. $ 116,000 b) Cash Dr. $ 20,000 Merchandise Inventory Dr. $ 51,000 To Frank Capital Cr. $    71,000

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