Laura Cisneros and Kay Osborn are equal partners in Creative Toys Nook. Cisneros and Osborn have decided to form Toy Chest Corporation to take over the operation of Creative Toys Nook on December 31, 2016. The corporation is authorized to issue 8,000 shares of no-par-value common stock with a stated value of $25 per share and 2,000 shares of $50 par-value, 12 percent preferred stock that is noncumulative and nonparticipating. Certain assets are revalued so that the accounts will reflect current values. Cisneros and Osborn will each receive 250 shares of Toy Chest Corporation preferred stock at par value ($50) and sufficient no-par-value shares of common stock at stated value ($25) to cover the partners' adjusted net investment in the partnership.
The trial balance shown below was prepared after the firm's accounting records were closed at the end of its fiscal year on December 31, 2016, and the assets were revalued as agreed on.
Instructions
1. In the corporation's general journal, record a memorandum entry describing its formation on December 31, 2016.

2. Make general journal entries as of December 31 to show the takeover of the assets and liabilities of the partnership and the issuance of stock in payment to Laura Cisneros and Kay Osborn. Use the same account names that the partnership used for assets and liabilities. Also use the following new account titles: Common Stock and Preferred Stock.
Analyze: After the corporation's formation, what is the fundamental accounting equation for Toy Chest Corporation?

Creative Toys Nook Adjusted Trial Balance December 31, 2016 ACCOUNT NAME DEBIT CREDIT Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Furniture and Equipment Accumulated Depreciation-Equipment Accounts Payable Laura Cisneros, Capital Kay sborn, Capital 26 540 00 102 45 30 45 0 00 74 74 Totals 181 3 181 3