The post closing trial balances of two proprietorships on January 1, 2012, are presented below.
|
Skorr Company |
Crane Company |
|||
|
Dr. |
Cr. |
Dr. |
Cr. |
|
|
Cash |
$ 10,000 |
$ 8,000 |
||
|
Accounts receivable |
18,000 |
30,000 |
||
|
Allowance for doubtful accounts |
$ 2,000 |
$ 3,000 |
||
|
Inventory |
35,000 |
20,000 |
||
|
Equipment |
60,000 |
35,000 |
||
|
Accumulated depreciation—equipment |
28,000 |
15,000 |
||
|
Notes payable |
20,000 |
|||
|
Accounts payable |
30,000 |
40,000 |
||
|
Skorr, capital |
43,000 |
|||
|
Crane, capital |
35,000 |
|||
|
$123,000 |
$123,000 |
$93,000 |
$93,000 |
Skorr and Crane decide to form a partnership, Commander Company, with the following agreed upon valuations for noncash assets.
|
Skorr Company |
Crane Company |
|
|
Accounts receivable |
$18,000 |
$30,000 |
|
Allowance for doubtful accounts |
2,500 |
4,000 |
|
Inventory |
38,000 |
25,000 |
|
Equipment |
40,000 |
22,000 |
All cash will be transferred to the partnership, and the partnership will assume all the liabilities of the two proprietorships. Further, it is agreed that Skorr will invest an additional $3,500 in cash, and Crane will invest an additional $16,000 in cash.
Instructions
(a) Prepare separate journal entries to record the transfer of each proprietorship’s assets 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, 2012.