Req 1: adjusting entries on the books of Red and White

RED WHITE

1. Red, capital 1620 1. White, capital 1800

ADA 1620 ADA 1800

(108,000 x .04 -2700) (120k x .04 -3k)

2. Accrued interest receivable 500 2. No entry

Red, Capital 500

(30k x 50/360 x .12)

3. White, capital 1k
3. Red, capital 600 Inventories 1k
Inventories 600 4. White, capital 2400
Prepaid Insurance 2400
(9600-9000)
(3k-600)
4. No entry
5. No entry
6. White, capital 800
Accum depn 800
5. Red, capital 1400 7. White, capital 938
Accum. Depn 1400 Accrued interest payable 938
6. No entry
(30k x 75/360 x.15)
7. No entry
8. No entry 8. Accrued Rent Receivable 1800
White, capital 1800

Red Capital White capital

1620 212,400 1800 166200

600 500 1000 1800

1400 2400

209,280 800

938

161,062
Req 2: closing entries on the books of Red and White

Books of Red Books of White

ADA 4320 ADA 4800

Accum. Depn 7400 Accum depn 4400

Accounts Pay 3000 AP 3600

Red, capital 209,280 Accrued Int Pay 938

Cash 16500 NP 30,000

AR 108000 White,capital 161,062

Accrued Int Rec 500 Cash 26400

NR 30,000 AR 120,000

Invty 9000 Accrued rent rec 1800

Machinery 60,000 Invty 8,000

Prepaid insurance 2400

F and F 48,000
Req. 3

Net Investment Method

Partner AC CC Diff

Red 209,280 209,280 0

White 161,000 161,062 0

Journal entry

Books of Red Books of White

Cash 16500 Cash 26400

AR 108,000 AR 120,000

Accrued int rec 500 Accrued rent Rec 1800

NR 30,000 Invty 8000

Invty 9000 Prepaid ins 2400

Machinery 52,600 F and F 43600

ADA 4320 ADA 4800

AP 3,000 AP 3600

Red capital 209,280 Accrued int pay 938

NP 30000

White, capital 161,062

Compound Entry

Cash 42,900

Other assets 375,900

ADA 9120

Liabilities 37,538

Red capital 209,280

White capital 161,062

B. bonus method c. Goodwill Method

Int ratio Partner AC CC Diff partner CC int ratio Total Agreed capital

55% RED 203688 209280 5592 Red 209280 55% 380,509

45% White 166654 161062 (5592) White 161,062 45% 357,916

370342 370342 0

Int ratio Partner AC CC Diff

55% Red 209280

Journal entry 45% white 161062

White, capital 5592 380509 370342 10167-Goodwill

Red capital 5592

Compound entry Partner int ratio TAC Capital credit

Cash 42,900 Red 55% 380509 209280

Other assets 375,900 White 45% 389509 171229

ADA 9120

Liabilities 37,538 Int ratio partner AC CC diff

Red capital 214,872 55% Red 209280 209280 0

White capital 155470 45% white 171229 161062 10167

Journal entry of Red Compound entry

Cash 16500 Cash 42,900

AR 108,000 Other assets 375,900

Accrued int rec 500 Goodwill 10,167

NR 30,000 ADA 9120

Invty 9000 Liabilities 37,538

Machinery 52,600 Red capital 209,280

ADA 4320 White capital 171,229

AP 3,000

Red capital 209,280

Journal entry of white

Cash 26400

AR 120,000

Accrued rent Rec 1800

Invty 8000

Prepaid ins 2400

F and F 43600

Goodwill 10167

ADA 4800

AP 3600

Accrued int pay 938

NP 30000

White, capital 171,229