REQUIRED Prepare the general journal entries to record the formation of the

Required prepare the general journal entries to

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REQUIRED: Prepare the general journal entries to record the formation of the partnership. ACCY112 Spring 2019 25
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EXAMPLE 2 CONT’D- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES 2019 $ $ May 1 Cash at bank 7,300 Accounts receivable 22,000 Inventory 8,000 Equipment 5,000 Allowance for doubtful debts 2,000 Accounts payable 4,300 Orange, Capital Cash at bank 17,000 Equipment 80,000 Lemon, Capital ACCY112 Spring 2019 26
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EXAMPLE 2 CONT’D- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES Balance Sheet As at 1May 2019 ASSETS LIABILITIES Cash at bank 24,300 Accounts Payable 4,300 Net Accounts Receivable 20,000 Inventory 8,000 OWNERS EQUITY ………….. 7,000 Orange, Capital 40,000 Equipment 85,000 Lemon, Capital 100,000 $144,300 $144,300 Balance Sheet As at 1May 2019 ASSETS LIABILITIES Cash at bank 24,300 Accounts Payable 4,300 Net Accounts Receivable 20,000 Inventory 8,000 OWNERS EQUITY ………….. 7,000 Orange, Capital 40,000 Equipment 85,000 Lemon, Capital 100,000 $144,300 $144,300 ACCY112 Spring 2019 27
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EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES Michelle and Ashley decide to amalgamate their business into a partnership 1 March 2019. Both partners bring their company Assets, and Liabilities as follows: REQUIRED: 1. Prepare the general journal entries to record the formation of the partnership. 2. Prepare the partnership’s detailed balance sheet as at 1 March 2019 ACCY112 Spring 2019 28
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Michelle’s Business: Carrying Amount Fair Value Cash 10, 000 10, 000 Accounts Receivable 70, 000 60, 000 Machinery 8, 000 12, 000 Accumulated Depreciation 3,140 - Office Supplies 2, 000 3, 000 Loan Payable (due in 2 years time) 5, 000 5, 000 ACCY112 Spring 2019 EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES 29
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Ashley’s Business: Carrying Amount Fair Value Cash 5, 000 5, 000 Accounts Receivable 75, 000 70, 000 Vehicle 8, 000 10, 000 Accumulated Depreciation 1,250 - Inventory 9, 500 5, 000 Accounts Payable 7, 000 7, 000 ACCY112 Spring 2019 EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES 30
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To record initial investment of Michelle in the Partnership. ACCY112 Spring 2019 EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES 31
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To record initial investment of Ashley in the Partnership. ACCY112 Spring 2019 EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES 32
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EXAMPLE 3- INITIAL INVESTMENT BY CONTRIBUTING CASH, ASSETS AND LIABILITIES Balance Michelle and Ashley Partnership Balance Sheet as at 1 March 2019 CURRENT ASSETS Cash at bank $15 000 Accounts receivable 145 000 Less: Allowance for Doubtful Debt (15 000) 130 000 Office Supplies 3 000 Inventory 5 000 TOTAL CURRENT ASSETS $153 000 NON-CURRENT ASSETS Machinery 12 000 Vehicle 10 000 TOTAL NON-CURRENT ASSETS 22 000 $175 000 CURRENT LIABILITIES Accounts payable 7 000 TOTAL CURRENT LIABILITIES 7 000 NON-CURRENT LIABILITIES Loan payable 5 000 TOTAL NON-CURRENT LIABILITIES 5 000 TOTAL LIABILITIES $12 000 NET ASSETS $163 000 PARTNERS’ EQUITY Michelle, Capital 80 000 Ashley, Capital 83 000 TOTAL PARTNER’S EQUITY $163 000 33
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CAPITAL ACCOUNT: RECORDING METHOD ACCY112 Spring 2019 34 Two methods in recording Capital Account: Method 1: Capital account reflecting Profit and Losses Method 2: Fixed Capital Balances
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METHOD 1: CAPITAL ACCOUNTS
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