E2 Charlene Tilson and Jade Petricka decide to organize the

E-2 Charlene Tilson and Jade Petricka decide to organize the Petson partnership. Tilson invests $15,000 cash, and Petricka contributes $12,000 cash and two assets from her sole proprietorship (accounts receivable $9,000 less allowance for doubtful accounts $1,000, and land having a book value of $7,000). Instructions Prepare the entry to record the investment in the partnership, assuming the net realizable value of the receivables is $7,500 and the land has a fair value of $10,000. E-3 Matt & Daveson Co. reports net income of $51,000. Interest allowances are Matt $8,000 and Daveson $10,000, salary allowances are Matt $30,000 and Daveson $20,000, and the remainder is shared equally. Show the division of net income. of LR Company have decided to liquidate their business. Noncash assets were sold for $125,000. The income ratios of the partners Cisneros, Gunselman, and Forren are 3:2:3, respectively. Complete the following schedule of cash payments for LR Company. Cisneros, Gunselman, 1 Item 15,000 Sale of noncash assets and of gain 5 Pay liabilities es Cash distribution to 10

Solution

E-2 Accounts title and explanation Debit Credit Cash $         27,000 Account receivable $           7,500 Land $         10,000 Tilson, Capital $         15,000 Petricka, Capital $         29,500 To record properties contributed to start partnership. Assets and liabilities are recorded at fair value. E-3 Matt Daveson Total Interest Allowance               8,000             10,000            18,000 Salary Allowance             30,000             20,000            50,000 Remainder Income             (8,500)             (8,500)          (17,000) Total $         29,500 $         21,500 $        51,000 E-4 Items Cash + Noncash Assets = Liabilities + Cisneros Capital + Gunselman Capital + Forren Capital + Balances before liquidation $         15,000 $         90,000 $        40,000 $        20,000 $        32,000 $        13,000 Sale of noncash assets and allocation of gain           125,000           (90,000)                      -              13,125              8,750            13,125 New Balances $      140,000 $                  -   $        40,000 $        33,125 $        40,750 $        26,125 Pay Liabilities           (40,000)                      -            (40,000)                     -                       -                       -   New Balances $      100,000 $                  -   $                 -   $        33,125 $        40,750 $        26,125 Cash distribution to partners        (100,000)                      -                        -            (33,125)          (40,750)          (26,125) Final Balances $                  -   $                  -   $                 -   $                 -   $                 -   $                 -