Module 5 Conway and Lawrence form a partnership by combining the assets and liabilities of their

Module 5:

Conway and Lawrence form a partnership by combining the assets and liabilities of their respective sole proprietorships. The following are the assets and liabilities of each partner and their market values.

                                  Conway                                                                  Lawrence

Asset          Book value              Market value Asset                  Book Value                        Market value

Cash           $20,000                                                           Cash      $10,000

Accounts receivable $5,000            $3,000                            Equipmnet    $50,000               $30,000

Note payable           $10,000                                                Accumulated Depreciation        $15,000

Inventory                $25,000          $28,000                           Accounts Payable   $7,000

Requirements:

1. Journalize the formation of the partnership.

Half way through the first year of operations Conway and Lawrence admit Korman to the partnership. Korman buys a 1/2 share for $37,000 in cash.

2. Journalize Korman's admission to the partnership.

The net income for the first year of operations was $50,000. After giving Conway a salary of $20,000, the rest of the net income is split evenly among the partners.

3. Prepare an income distribution worksheet.

4. Journalize the closing of the income summary accounts to the capital accounts.

After 5 years of operation Conway, Korma, and Lawrence decide to dissolve their partnership. The following are the account balances before liquidation begins:

5. Complete the liquidating worksheet.