Lion and tiger had operated as a partnership for a number, Ask an Expert

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Lion and Tiger had operated as a partnership for a number of years. At June 30, 20XX their balance sheet appeared as below:

LION & TIGER

Balance Sheet, June 30, 20XX

Assets:

Cash	$5,000
Receivables	$30,000
Inventories	$60,000
Equipment (net)	$80,000
Building (net)	$90,000
	$265,000

Liabilities:

Accounts Payable	$34,000
Accrued Liabilities	$6,000
Mortgage Payable	$80,000
Lion, Capital	$75,000
Tiger, Capital	$70,000
	$265,000

Peters is interested in becoming a partner on equal terms with Lion and Tiger. The partners do not wish to have any goodwill exist on their books, and they have carefully studied their various asset values to determine the basis for Peters' investment. It is agreed that prior to admission of Peters, the receivables $66,000. Peters agrees to invest $75,000 for a one-third interest in the partnership. The partners agree that all capital accounts shall be equal after this investment. Assume an expansion.

Required:

1. Prepare Journal entries necessary to reflect the above. How much cash should Tiger pay Lion on a personal basis?

2. Assume the partners DO wish to record goodwill and no adjustments are necessary to the asset values other than goodwill. Prepare journal entries to record transactions. (Do not assume capital accounts are to be equal after entry.)

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9952586

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