On 1 March 2019 Dana Frost and Bill Horton formed a partnership. They agreed to share the
Question:
On 1 March 2019 Dana Frost and Bill Horton formed a partnership. They agreed to share the profits and losses in the ratio of 3:2. Ms. Frost contributed $50,000 in cash and office equipment which cost $70,000 and had a fair value of $100,000. Assets and liabilities assumed by the partnership from Mr. Horton’s business are shown below at both carrying amount and fair value.
Carrying Amount | Fair Value | |
Cash at Bank | $33,000 | $33,000 |
Accounts Receivable | 15,000 | 14,000 |
Inventory | 14,700 | 10,200 |
Machinery | 93,000 | 99,000 |
1-year Debentures | 11,000 | 11,000 |
Loan Payable | 20,000 | 20,000 |
During the year ended 30 June 2019, Ms. Forest contributed an additional $8,000 in cash. In addition, during the year Mr Horton withdrew $5,000 and Ms Forest withdrew $6,000 in anticipation of the partnership making profits for the year ended 30 June 2019. However, for the year ended 30 June 2019 the partnership made a net loss of $22,000. No interest was charged on the partner's withdrawals and no retained earnings accounts are used by the partnership.
Narrations are not required for the journal entries.
Required:
a) Prepare the journal entries to record each partner’s initial investment at 1 March 2019
b) Determine the balance of Bill Horton's equity in the partnership at 30 June 2019
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III