| Problem 12-1A (Part Level Submission) |
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The post-closing trial balances of two proprietorships on January 1, 2014, are presented below.
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Sorensen Company
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Lucas Company
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Dr.
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Cr.
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Dr.
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Cr.
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| Cash |
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$14,000
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$12,000
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|
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| Accounts receivable |
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17,500
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26,000
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| Allowance for doubtful accounts |
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$3,000
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|
|
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$4,400
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| Inventory |
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26,500
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18,400
|
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| Equipment |
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45,000
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29,000
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| Accumulated depreciation—equipment |
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24,000
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11,000
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| Notes payable |
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18,000
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|
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|
15,000
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| Accounts payable |
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22,000
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|
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31,000
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| Sorensen, capital |
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36,000
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| Lucas, capital |
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24,000
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$103,000
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$103,000
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$85,400
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$85,400
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Sorensen and Lucas decide to form a partnership, Solu Company, with the following agreed upon valuations for noncash assets.
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Sorensen Company
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Lucas Company
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| Accounts receivable |
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$17,500 |
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$26,000 |
| Allowance for doubtful accounts |
|
4,500 |
|
4,000 |
| Inventory |
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28,000 |
|
20,000 |
| Equipment |
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25,000 |
|
15,000 |
All cash will be transferred to the partnership, and the partnership will assume all the liabilities of the two proprietorships. Further, it is agreed that Sorensen will invest an additional $5,000 in cash, and Lucas will invest an additional $19,000 in cash.
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