Recording new partner investment and subsequent balance sheet
The partnership of Addie and Bal is adding a new partner, Cathy, and its assets and equities at book value and fair value just prior to her admission to the partnership on January 1, 2011, are as follows:
|
Book Value |
Fair Value |
|
|
Assets |
||
|
Cash |
$ 15,000 |
$ 15,000 |
|
Accounts receivable—net |
45,000 |
40,000 |
|
Inventories |
50,000 |
60,000 |
|
Plant assets—net |
90,000 |
105,000 |
|
$200,000 |
$220,000 |
|
|
Equities |
$ 30,000 |
$ 30,000 |
|
Accounts payable |
50,000 |
40,000 |
|
15% note payable |
64,000 |
|
|
Addie capital (60%) |
56,000 |
|
|
Bal capital (40%) |
$200,000 |
On January 2, 2011, Addie and Bal take Cathy into the partnership of Addie, Bal, and Cathy for a 40 percent interest in capital and profits.
REQUIRED
1. Prepare journal entries for the admission of Cathy into the partnership for an investment of $150,000 assuming that assets (including any goodwill) are revalued.
2. Prepare a balance sheet for the Addie, Bal, and Cathy partnership on January 2, 2011, just after the admission of Cathy.