M9 Assignment
| Module 9 Assignment: | |||||||||||||||
| Conway and Lawrence form a partnership by combining the assets and liabilities of their respective sole proprietorships. The following are the assets and liabilities of each partner and their market values. | |||||||||||||||
| Conway | Lawrence | ||||||||||||||
| Asset | Book value | Market value | Asset | Book Value | Market value | ||||||||||
| Cash | $20,000 | Cash | $10,000 | ||||||||||||
| Accounts receivable | $5,000 | $3,000 | Equipmnet | $50,000 | $30,000 | ||||||||||
| Note payable | $10,000 | Accumulated Depreciation | $15,000 | ||||||||||||
| Inventory | $25,000 | $28,000 | Accounts Payable | $7,000 | |||||||||||
| Requirements: | |||||||||||||||
| 1 | Journalize the formation of the partnership. | ||||||||||||||
| Journal | |||||||||||||||
| Accounts | Debit | Credit | |||||||||||||
| Half way through the first year of operations Conway and Lawrence admit Korman to the partnership. Korman buys a 1/2 share for $37,000 in cash. | |||||||||||||||
| 2 | Journalize Korman's admission to the partnership. | ||||||||||||||
| Journal | |||||||||||||||
| Accounts | Debit | Credit | |||||||||||||
| The net income for the first year of oprations was $50,000. After giving Conway a salary of $20,000, the rest of the net income is split evenly among the partners. | |||||||||||||||
| 3 | Prepare an income distribution worksheet. | ||||||||||||||
| Income Distribution | |||||||||||||||
| Net Income | $50,000 | ||||||||||||||
| Conway | Korman | Lawrence | |||||||||||||
| 4 | Journalize the closing of the income summary accounts to the capital accounts. | ||||||||||||||
| Journal | |||||||||||||||
| Accounts | Debit | Credit | |||||||||||||
| After 5 years of operation Conway, Korma, and Lawrence decide to dissolve their partnership. The following are the account balances before liquidation begins: | |||||||||||||||
| Cash | 127,000 | The equipment is sold for $8,000 | |||||||||||||
| Equipment | 20,000 | ||||||||||||||
| Note Payable | 6,000 | ||||||||||||||
| Capital, Conway | 65,000 | ||||||||||||||
| Capital,Korman | 40,000 | ||||||||||||||
| Capital, Lawrence | 36,000 | ||||||||||||||
| 5 | Complete the liquidating worksheet. | ||||||||||||||
| Liquidation | |||||||||||||||
| Cash | Equipment | Note payable | Conway | Korman | Lawrence | ||||||||||
| 6 | Journalize each step of the closing. | ||||||||||||||
| Journal | |||||||||||||||
| Accounts | Debit | Credit | |||||||||||||
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