Q 1: A, B, and C are forming a partnership with the name ABC Co.

A is transferring 500,000 of cash to

the partnership. B is transferring land worth 150,000 and a small building worth 800,000. C transfers cash
of 90,000, accounts receivable of 320,000 and equipment worth 190,000. The partnership expects to
collect 290,000 of the accounts receivable.
Instructions: Prepare the journal entries to record each of the partners’ investments.
Q 2: The post-closing trial balances of two proprietorships on January 1, 2014, are presented below
Ali. Co Bilal. Co
Dr Cr Dr Cr
Cash 70,000 60,000
Accounts receivable 87,500 130,000
Allowance for doubtful accounts 15,000 22,000
Inventory 132,500 92,000
Equipment 225,000 145,000
Accumulated depreciation—equipment 120,000 55,000
Notes payable 90,000 75,000
Accounts payable 110,000 155,000
A Co Capital 180,000
B Co Capital 24,000
515,000 515,000 427,000 427,000
They decide to form a partnership, AB. Co, with the following agreed upon valuations for noncash assets.
Ali. Co Bilal. Co
Accounts receivable 87,500 130,000
Allowance for doubtful accounts 22,500 20,000
Inventory 140,000 100,000
Equipment 125,000 75,000
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 A will invest an additional 25,000 in cash, and B will invest an
additional 95,000 in cash.
Required: Prepare separate journal entries to record the transfer of each proprietorship’s assets and
liabilities to the partnership.
Journalize the additional cash investment by each partner
Prepare a classified balance sheet for the partnership on January 1, 2014.
Q 3: Khan and Kamal have capital balances on January 1 of 250,000 and 200,000, respectively in KK Co.
The partnership income-sharing agreement provides for
(1) Annual salaries of 100,000 for Khan and 60,000 for Kamal
(2) Interest at 10% on beginning capital balances, and
(3) Remaining income or loss to be shared 60% by Khan and 40% by Kamal.
Instructions
(a) Prepare a schedule showing the distribution of net income, assuming net income is (1) 550,000 and (2)
150,000.
(b) Journalize the allocation of net income in each of the situations above.