Accounting help please

Mustang4119

New Member
May 26, 2004
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I am stuck on couple of problems. I dont understand how to do these. Who knows alot about accounting or has a major in this. Thanks. This problem is on formation partnership.


Mary Hartmann, sole proprietor of a hardware business, decides to form a partnership with Ned Isaacs. Mary’s accounts are as follows:


Book Value Market Value
Cash 20,000 20,000
Accounts Receivable (net) 52,000 40,000
Inventory 112,000 125,000
Land 40,000 100,000
Building (net) 300,000 340,000
Accounts Payable 25,000 25,000
Mortgage Payable 75,000 75,000



Ned agrees to contribute 70,000 for a 20% interest. Journalize the entries to record (a) Mary’s investment and (b) Ned’s investment.
 
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This one is admitting new partner


Ben Gumbel and Fred Howe, partners sharing net income in the ratio of 2:1, admit Alan Brokaw to the partnership in accordance with the following agreement:

1. Merchandise inventory recorded in the partnership accounts at 62,500 is to be revalued at its current replacement price of 67,000.

2. Brokaw is to invest 48,000 in cash for a 30% interest in the partnership, which has total net assets (assets minus liabilities) of 130,000 after the inventory is revalued.

3. The income-sharing ratio of Gumbel, Howe, and Brokaw is to be 2:1:1.



(a) Journalize the entries to record the revaluation of merchandise inventory, and the admission of Brokaw to the partnership.

(b) A few years later, the capital balances of Gumbel, Howe, and Brokaw were 140,000, 90,000 and 55,000 respectively. At this time, Marvin King is admitted to the partnership by the purchase of one-half of Gumbel’s interest for 80,000. Journalize the entry to record the admission of King to the partnership.