The post-closing trial balances of two proprietorships on January 1, 2014, are presented below.
|
Cash Accounts receivable |
Utech Company |
Flott Company |
||
|
$ 10,000 18,000 |
$ 8,000 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 |
||
|
Utech, capital |
43,000 |
|||
|
Flat, capital |
35,000 |
|||
|
$123,000 |
$123,000 |
$93,000 |
$93,000 |
|
Utech and Flott decide to form a partnership, Commander Company, with the following agreed upon valuations for noncash assets.
|
Utech Company |
Flott Company |
|
|
Accounts receivable |
$18,000 |
$30,000 |
|
Allowance for doubtful accounts |
2,500 |
4,000 |
|
Inventory |
38,000 |
25,000 |
|
Equipment |
35,000 |
18,000 |
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 Utech will invest an additional $3,500 in cash, and Flott 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, 2014.