A Summary Balance Sheet for the Partnership of Quail,Rainne and Selma

question 29

Essay

A summary balance sheet for the partnership of Quail,Rainne and Selma on December 31,2014 is shown below.Partners Quail,Rainne and Selma allocate profit and loss in their respective ratios of 6:3:1.
Assets
Equities
The partners agree to admit Trask for a one-tenth interest.The fair market value for partnership land is $260,000,and the fair market value of the inventory is $370,000.
Required:
1.Record the entry to revalue the partnership assets prior to the admission of Trask.
2.Calculate how much Trask will have to invest to acquire a 10% interest.
3.Assume the partnership assets are not revalued.If Trask paid $300,000 to the partnership in exchange for a 10% interest,what would be the bonus that is allocated to each partner's capital account?

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of receivables that may not be collectible.

Contra Asset

An account on a company's balance sheet that reduces the total amount of an asset, such as accumulated depreciation.

Normal Balance

In accounting, the normal balance is the side (debit or credit) of an account that is usually increased. For example, asset accounts normally have a debit balance, while liabilities and equity accounts have a credit balance.

Direct Write-off Method

A method of accounting for bad debts that involves charging the amount of an uncollectible account directly to the expense account when it is deemed non-recoverable.