Investment by partners; financial statements.
Abram, Haas, and Tidwell formed a partnership to practice law by combining their respective sole proprietorships. The assets and liabilities contributed to the firm on January 2, 19X4, the date of formation, follow.
|
Book Value |
Fair Market Value |
|
|
Abram |
||
|
Land |
40,000 |
115,000 |
|
Mortgage payable |
38,000 |
38,000 |
|
Haas |
||
|
Office supplies |
42,000 |
30,000 |
|
Office equipment |
64,000 |
48,000 |
|
Tidwell |
||
|
Cash |
50,000 |
50,000 |
|
Accounts |
20,000 |
18,000 |
|
Short-term investments |
4,000 |
4,000 |
Instructions:
a. Prepare journal entries to record the investments of Abram, Haas, Tidwell in the new partnership.
b. Prepare a classified balance sheet for the partnership immediately after the investments are recorded.
c. The partners share profits and losses equally, and the first year’s n income was $66,000.
Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners’ equity for the firm.