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Exercise 19.2 Recording Investment of Assets and Liabilities

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Exercise 19.2 Recording Investment of Assets and Liabilities in a Partnership
Erika Bobo operates a sole proprietorship business that sells hiking equipment. Bobo has agreed to transfer her assets and liabilities to a partnership that will operate The Climb Co. Bobo will own a two-thirds interest in the capital of the partnership. The agreed upon values of assets and liabilities to be transferred follow.

Total Accounts receivable of $59,000 will be transferred and approximately $1,000 of these accounts may be uncollectible.
Merchandising Inventory, $88,200
Furniture and fixtures, $33,000
Accounts payable, $14,000

Record the receipt of the assets and liabilities by the partnership in the general journal.

19.3 Preparing a Balance Sheet for a Partnership
On May 1, 2007, XXXXX XXXXX and Dalia Nash formed The Rec Room. The two partners invested cash and other assets and liabilities with the following agreed upon values.

Kim: Cash, $5,800; Merchandising inventory, $11,000; Equipment, $36,000; Accounts payable, $7,800.

Dalia: Furniture, $11,000; Cash, $16,000.

Kim is to own two-thirds of the capital, and Dalia is to own one-third of the capital, but they will spit profits and losses equally. Prepare a balance sheet for the partnership just after the assets and liabilities have been transferred to it.

19.4 Computing the Division of Net Income of a Partnership
The partnership agreement of Mary Ayers and Neil Stewart does not indicate how the profits and losses will be shared. Before dividing the net income, Ayers capital account balance was $160,000, and Stewart’s capital account balance was $40,000. The net income for their firm for the year that just ended was $94,000. How much income will be allocated to Ayers and how much to Stewart?

19.5 Computing and Recording Division of Net Income Based on Fixed Ratio
The net income for the new partnership known as The Super Store for the year ended December 31, 2007 was $12,000. The partners, Dan Chase and XXXXX XXXXX, share profits in the ration of 60 and 40 percent, respectively. Record the general journal entry (or entries) to close the Income Summary account.
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