FORMATION> Abe and Babe decide to form a partnership on Jan. 1, 1999. From their own...

 

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FORMATION> Abe and Babe decide to form a partnership on Jan. 1, 1999. From their own businesses or personal assets they contribute the following assets which are shown at book value. BALANCE SHEET of Mr. Abe before forming Partnership $4,500 >>>> Abe contributes: Cash A-Rec Allow-Bad-Debt A-Pay $0 22,500 -1,500 21,000 19,750 Inv Equipment Acc-Depr Total Assets 32,000 A, Capital Total Liab + Equity -18,000 14,000 59,250 $59,250 $59,250 Babe contributes from his books: CASH - $30,000, ACCOUNTS PAYABLE $10,000 AND A 1957 RUSTY CHEVY $1,200 a. Abe and Babe agree that the fair value of the store equipment is $10,000, inventory is $20,000, and net receivables is $19,500. Babe's Chevy is worth $2,000. (1) Record separate entries for each partner using the above data. Start a new set of books. (2) *What would Babe's entry be if they agreed he would have equal percentage interest in the partnership? ** What would Abe's entry be if they agreed $7,000 goodwill related to Abe's business. (3) b. Re-do (1) but use Abe's existing books for the partnership. FORMATION> Abe and Babe decide to form a partnership on Jan. 1, 1999. From their own businesses or personal assets they contribute the following assets which are shown at book value. BALANCE SHEET of Mr. Abe before forming Partnership $4,500 >>>> Abe contributes: Cash A-Rec Allow-Bad-Debt A-Pay $0 22,500 -1,500 21,000 19,750 Inv Equipment Acc-Depr Total Assets 32,000 A, Capital Total Liab + Equity -18,000 14,000 59,250 $59,250 $59,250 Babe contributes from his books: CASH - $30,000, ACCOUNTS PAYABLE $10,000 AND A 1957 RUSTY CHEVY $1,200 a. Abe and Babe agree that the fair value of the store equipment is $10,000, inventory is $20,000, and net receivables is $19,500. Babe's Chevy is worth $2,000. (1) Record separate entries for each partner using the above data. Start a new set of books. (2) *What would Babe's entry be if they agreed he would have equal percentage interest in the partnership? ** What would Abe's entry be if they agreed $7,000 goodwill related to Abe's business. (3) b. Re-do (1) but use Abe's existing books for the partnership.

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