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Incorporation of a Partnership When Alice and Betty decided to incorporate their
Incorporation of a Partnership When Alice and Betty decided to incorporate their
When Alice and Betty decided to incorporate their partnership, its trial balance w as as foll o ws:
| Debit | C r edit | ||
| Cash | $ 8,000 | ||
| Accounts Receivable (net) | 22,400 | ||
| Inventory | 36,000 | ||
| Equipment (net) | 47,200 | ||
| Accounts Payable | $ 17,200 | ||
| Alice, Capital (60%) | 62,400 | ||
| Betty, Capital (40%) | 34,000 | ||
| Total | $113,600 | $113,600 |
The partnership’s books will be closed, and new books will be used for A & B Corporation. The following additional information is available:
1. The estimated fair values of the assets follow:
| Accounts Receivable | $21,600 |
| Inventory | 32,800 |
| Equipment | 40,000 |
2. All assets and liabilities are transferred to the corporation.
3. The common stock is $10 par. Alice and Betty receive a total of 7,100 shares.
4. The partners’ profit and loss–sharing ratio is shown in the trial balance.
Required
a. Prepare the entries on the partnership’s books to record (1) the revaluation of assets, (2) the trans- fer of the assets to A & B Corporation and the receipt of the common stock, and (3) the closing of the books.
b . Prepare the entries on A & B Corporation’s books to record the assets and the issuance of the common stock.
Incorporation of a Partnership
When Alice and Betty decided to incorporate their partnership, its trial balance w as as foll o ws:
| Debit | C r edit | ||
| Cash | $ 8,000 | ||
| Accounts Receivable (net) | 22,400 | ||
| Inventory | 36,000 | ||
| Equipment (net) | 47,200 | ||
| Accounts Payable | $ 17,200 | ||
| Alice, Capital (60%) | 62,400 | ||
| Betty, Capital (40%) | 34,000 | ||
| Total | $113,600 | $113,600 |
The partnership’s books will be closed, and new books will be used for A & B Corporation. The following additional information is available:
1. The estimated fair values of the assets follow:
| Accounts Receivable | $21,600 |
| Inventory | 32,800 |
| Equipment | 40,000 |
2. All assets and liabilities are transferred to the corporation.
3. The common stock is $10 par. Alice and Betty receive a total of 7,100 shares.
4. The partners’ profit and loss–sharing ratio is shown in the trial balance.
Required
a. Prepare the entries on the partnership’s books to record (1) the revaluation of assets, (2) the trans- fer of the assets to A & B Corporation and the receipt of the common stock, and (3) the closing of the books.
b . Prepare the entries on A & B Corporation’s books to record the assets and the issuance of the common stock.
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