Chapter 12 HW

1. PR.12-01.ALGO
2. PR.12-02.ALGO
3. PR.12-03.ALGO
4. PR.12-04.ALGO

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Admitting New Partner

Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays is to be admitted to the partnership on September 1 of the current year, in accordance with the following agreement:

1. Assets and liabilities of the old partnership are to be valued at their book values as of August 31, except for the following:
   1. Accounts receivable amounting to $2,000 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts.
   2. Merchandise inventory is to be valued at $50,800.
   3. Equipment is to be valued at $115,600.
2. Mays is to purchase $49,000 of the ownership interest of Estrada for $53,000 cash and to contribute another $26,000 cash to the partnership for a total ownership equity of $75,000.

The post-closing trial balance of Caldwell and Estrada as of August 31 is as follows:

Caldwell and EstradaPost-Closing Trial BalanceAugust 31, 20Y9 Debit Balances Credit BalancesCash5,000 Accounts Receivable31,000 Allowance for Doubtful Accounts 1,200Merchandise Inventory47,500 Prepaid Insurance1,700 Equipment134,000 Accumulated DepreciationEquipment 41,500Accounts Payable 9,800Notes Payable (current) 31,700Brian Caldwell, Capital 72,000Adriana Estrada, Capital 63,000 219,200 219,200

Required:

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1. Journalize the entries as of August 31 to record the revaluations, using a temporary account entitled Asset Revaluations. Debits and credits to the Asset Revaluation account are losses and gains from revaluation, respectively. The balance in the accumulated depreciation account is to be eliminated. After journalizing the revaluations, close the balance of the asset revaluations account to the capital accounts of Brian Caldwell and Adriana Estrada.

For a compound transaction, if an amount box does not require an entry, leave it blank.

Aug. 31-Accounts ReceivableAccounts ReceivableAllowance for Doubtful AccountsAsset RevaluationsEquipmentMerchandise InventoryAsset RevaluationsAsset RevaluationsAsset Revaluations Accounts ReceivableAsset RevaluationsCashEquipmentMerchandise InventoryAccounts ReceivableAccounts ReceivableAccounts Receivable Allowance for Doubtful AccountsAsset RevaluationsCashEquipmentMerchandise InventoryAllowance for Doubtful AccountsAllowance for Doubtful AccountsAllowance for Doubtful AccountsAug. 31-Merchandise InventoryAdriana Estrada, CapitalAsset RevaluationsCashMerchandise InventoryBrian Caldwell, CapitalMerchandise InventoryMerchandise Inventory Adriana Estrada, CapitalAsset RevaluationsCashEquipmentBrian Caldwell, CapitalAsset Revaluations Asset RevaluationsAug. 31-EquipmentAccumulated Depreciation-EquipmentAsset RevaluationsCashEquipmentBrian Caldwell, CapitalAccumulated Depreciation-EquipmentAccumulated Depreciation-EquipmentAccumulated Depreciation-Equipment Accounts ReceivableAdriana Estrada, CapitalCashEquipmentBrian Caldwell, CapitalEquipmentEquipmentEquipment Accumulated Depreciation-EquipmentAdriana Estrada, CapitalAsset RevaluationsCashBrian Caldwell, CapitalAsset RevaluationsAsset RevaluationsAsset RevaluationsAug. 31-CloseAccumulated Depreciation-EquipmentAsset RevaluationsCashEquipmentBrian Caldwell, CapitalAsset RevaluationsAsset RevaluationsAsset Revaluations Adriana Estrada, DrawingAsset RevaluationsCashBrian Caldwell, CapitalBrian Caldwell, DrawingBrian Caldwell, CapitalBrian Caldwell, CapitalBrian Caldwell, Capital Adriana Estrada, CapitalAsset RevaluationsCashMerchandise InventoryBrian Caldwell, DrawingAdriana Estrada, CapitalAdriana Estrada, CapitalAdriana Estrada, Capital

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2. Journalize the additional entries to record Mays's entrance to the partnership on September 1, 20Y9.

September 1-purchaseAdriana Estrada, CapitalAsset RevaluationsInventoryBrian Caldwell, CapitalKris Mays, CapitalAdriana Estrada, CapitalAdriana Estrada, Capital Adriana Estrada, CapitalAsset RevaluationsCashBrian Caldwell, CapitalKris Mays, CapitalKris Mays, Capital Kris Mays, CapitalSeptember 1-contributionAsset RevaluationsCashEquipmentBrian Caldwell, CapitalKris Mays, CapitalCashCash Adriana Estrada, CapitalAsset RevaluationsCashBrian Caldwell, CapitalKris Mays, CapitalKris Mays, Capital Kris Mays, Capital

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Feedback

2. Record two separate entries: (1) to transfer the ownership interest, (2) to record the additional investment.

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3. Present a balance sheet for the new partnership as of September 1, 20Y9.

AssetsCurrent assets: Accounts PayableCashEquipmentBrian Caldwell, CapitalKris Mays, CapitalCash $Cash Accounts ReceivableAdriana Estrada, DrawingEquipmentNotes PayableKris Mays, CapitalAccounts Receivable$Accounts Receivable Less Accounts PayableLess Allowance for Doubtful AccountsLess CashLess Brian Caldwell, CapitalLess Kris Mays, DrawingLess Allowance for Doubtful AccountsLess Allowance for Doubtful AccountsLess Allowance for Doubtful Accounts Adriana Estrada, DrawingEquipmentMerchandise InventoryNotes PayableBrian Caldwell, CapitalMerchandise Inventory Merchandise Inventory Accounts PayableEquipmentNotes PayablePrepaid InsuranceKris Mays, DrawingPrepaid Insurance Prepaid Insurance Total current assets $fill in the blank 34502df7f038062_12Property, plant, and equipment: Accounts ReceivableAllowance for Doubtful AccountsEquipmentMerchandise InventoryPrepaid Insurance - Select -Total assets $fill in the blank 34502df7f038062_15LiabilitiesCurrent liabilities: Accounts PayableAccounts ReceivableCashMerchandise InventoryPrepaid Insurance $- Select - CashMerchandise InventoryNotes PayablePrepaid InsuranceKris Mays, Drawing - Select - Total liabilities $fill in the blank 34502df7f038062_20Partners' EquityAdriana Estrada, DrawingCashBrian Caldwell, CapitalBrian Caldwell, DrawingKris Mays, Drawing $- Select - Accounts ReceivableAdriana Estrada, CapitalAdriana Estrada, DrawingBrian Caldwell, DrawingKris Mays, Drawing - Select - Accounts PayableAdriana Estrada, DrawingMerchandise InventoryBrian Caldwell, DrawingKris Mays, Capital - Select - Total partners' equity fill in the blank 34502df7f038062_27Total liabilities and partners' equity $fill in the blank 34502df7f038062_28

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