Musa Moshref and Shaniqua Hollins have operated a successful firm for many years, sharing net income and net losses equally. Taylor Anderson is to be admitted to the partnership on July 1 of the current year, in accordance with the following agreement:
1. Assets and liabilities of the old partnership are to be valued at their book values as of June 30, except for the following:
Accounts receivable amounting to $2,500 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts.
Merchandise inventory is to be valued at $76,600.
Equipment is to be valued at $155,700.
2. Anderson is to purchase $70,000 of the ownership interest of Hollins for $75,000 cash and to contribute another $45,000 cash to the partnership for a total ownership equity of $115,000.
The post -closing trial balance of Moshref and Hollins as of June 30 is as follows:
Cash $8,000
Accounts Receivable $42,000
Allowance for Doubtful Accounts
Merchandise Inventory $72,000
Prepaid Insurance $3,000
Equipment $180,000
Accumulated Depreciation---Equipment 43,100
Accounts Payable 21,300
Notes Payable 35,000
Musa Moshref, Capital 120,000
Shaniqua Hollins, Capital 85,000
306,000 306,000
Journalize the entries as of June 30 to record the revaluations, using a temporary account entitled Asset Revaluations. The balance in the accumulated depreciation account is to be eliminated. After journalizing the revaluations, close the balance of the asset revaluations account to the capital accounts of Musa Moshref and Shaniqua Hollins.
Journalize the additional entries to record Anderson's entrance to the partnership on July 1, 2014.
Present a balance sheet for the new partnership as of July 1, 2014.