Question

Jan and Sue have engaged successfully as partners in their law firm for a number of years. Soon after their state’s incorporation laws are changed to allow professionals to incorporate, the partners decide to organize a corporation to take over the business of the partnership.
The after-closing trial balance for the partnership is as follows:


Figures shown parenthetically reflect agreed profit- and loss-sharing ratios.
The partners have hired you as an accountant to adjust the recorded assets and liabilities to their market values and to close the partners’ capital accounts to the new corporate capital stock. The corporation is to retain the partnership’s books, and the assets of the partnership should be taken over by the corporation in the following amounts:
Cash ........... $15,000
Accounts receivable .... 32,400
Allowance for uncollectibles . 2,900
Prepaid insurance ....... 800
Office equipment ..... 16,000

Jan’s loan is to be transferred to her capital account in the amount of $6,600.

Required:
A. Prepare the necessary journal entries to express the agreement described.
B. Prepare the entries to record the issuance of shares to Jan and Sue, assuming the issuance of 400 shares (par value $100) of stock to Jan andSue.


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  • CreatedMarch 16, 2015
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