Conway and Lawrence form a partnership by combining the assets and liabilities of their respective s 1 answer below »

Conway and Lawrence form a partnership by combining the assets and liabilities of their respective sole proprietorships. The following are the assets and liabilities of each partner and their market values.

Conway

Lawrence

Asset

Book value

Market value

Asset

Book Value

Market value

Cash

$20,000

Cash

$10,000

Accounts receivable

$5,000

$3,000

Equipmnet

$50,000

$30,000

Note payable

$10,000

Accumulated Depreciation

$15,000

Inventory

$25,000

$28,000

Accounts Payable

$7,000

Requirements:

1

Journalize the formation of the partnership.

Journal

Accounts

Debit

Credit

Half way through the first year of operations Conway and Lawrence admit Korman to the partnership. Korman buys a 1/2 share for $37,000 in cash.

2

Journalize Korman's admission to the partnership.

Journal

Accounts

Debit

Credit

The net income for the first year of oprations was $50,000. After giving Conway a salary of $20,000, the rest of the net income is split evenly among the partners.

3

Prepare an income distribution worksheet.

Income Distribution

Net Income

$50,000

Conway

Korman

Lawrence

4

Journalize the closing of the income summary accounts to the capital accounts.

Journal

Accounts

Debit

Credit

After 5 years of operation Conway, Korma, and Lawrence decide to dissolve their partnership. The following are the account balances before liquidation begins:

Cash

127,000

The equipment is sold for $8,000

Equipment

20,000

Note Payable

6,000

Capital, Conway

65,000

Capital,Korman

40,000

Capital, Lawrence

36,000

5

Complete the liquidating worksheet.

Liquidation

Cash

Equipment

Note payable

Conway

Korman

Lawrence

6

Journalize each step of the closing.

Journal

Accounts

Debit

Credit

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