Preparing partnership financial statements
On December 31, 2012, Dana Davis and Lou Ghai agree to combine their proprietorships into a partnership. Their balance sheets on December 31 are shown as follows.
|
Davis’s Business |
Ghai’s Business |
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|
Book Value |
Current Market Value |
Book Value |
Current Market Value |
|
|
Assets |
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|
Cash |
$9,000 |
$9,000 |
$6,000 |
$6,000 |
|
Accounts receivable |
26,000 |
24,000 |
16,000 |
14,000 |
|
Inventory |
49,000 |
43,000 |
38,000 |
38,000 |
|
Plant assets (net) |
123,000 |
105,000 |
54,000 |
58,000 |
|
Total assets |
$207,000 |
$181,000 |
$114,000 |
$116,000 |
|
Liabilities and Owners’ Equity |
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|
Accounts payable |
$24,000 |
$24,000 |
$12,000 |
$12,000 |
|
Accrued expenses payable |
12,000 |
12,000 |
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|
Notes payable |
55,000 |
55,000 |
||
|
Davis, capital |
116,000 |
? |
||
|
Ghai, capital |
102,000 |
? |
||
|
Total liabilities and owners’ equity |
$207,000 |
$181,000 |
$114,000 |
116,000 |
Requirements
1. Journalize the contributions of Davis and Ghai to the partnership.
2. Prepare the partnership balance sheet at December 31, 2012.