Incorporation of a Partnership When Alice and Betty decided to incorporate their partnership, its

Incorporation of a Partnership

_{When Alice and Betty decided to incorporate their partnership, its trial balance w as as foll o ws:}

	Debit		C r edit
Cash	$ 8,000
Accounts Receivable (net)	22,400
Inventory	36,000
Equipment (net)	47,200
Accounts Payable			$ 17,200
Alice, Capital (60%)			62,400
Betty, Capital (40%)			34,000
Total	$113,600		$113,600

The partnership’s books will be closed, and new books will be used for A & B Corporation. The following additional information is available:

1. The estimated fair values of the assets follow:

Accounts Receivable	$21,600
Inventory	32,800
Equipment	40,000

2. All assets and liabilities are transferred to the corporation.

3. The common stock is $10 par. Alice and Betty receive a total of 7,100 shares.

4. The partners’ profit and loss–sharing ratio is shown in the trial balance.

Required

a. Prepare the entries on the partnership’s books to record (1) the revaluation of assets, (2) the trans- fer of the assets to A & B Corporation and the receipt of the common stock, and (3) the closing of the books.

b . Prepare the entries on A & B Corporation’s books to record the assets and the issuance of the common stock.