When Disney and Charles decided to incorporate their partnership, the trial balance was as follows: DebitCreditCash$50,000 Accounts Receivable (net) 25,000 Inventory 55,000 Equipment (net) 120,000 Accounts Payable $40,000 Disney, Capital 140,000 Charles, Capital 70,000 Total$250,000 $250,000 The partnership's books will be closed, and new books will be used for D & C Corporation. The following additional information is available:1. The estimated fair values of the assets follow: Accounts Receivable$22,000 Inventory 48,000 Equipment 95,000 2. All assets and liabilities are transferred to the corporation. 3. The common stock is $5 par. Disney and Charles receive a total of 24,000 shares. 4. Disney and Charles share profits
and losses in the ratio 6:4. Required:a. Prepare the entries on the partnership's books to record (1) the revaluation of assets, (2) the transfer of the assets to the D & C Corporation and the receipt of the common stock, and (3) the closing of the books.b. Prepare the entries on D & C Corporation's books to record the assets and the issuance of the common stock.
What will be an ideal response?
a)
| Disney, Capital | 21,000 | |
| Charles, Capital | 14,000 | |
| Accounts Receivable | 3,000 | |
| Inventory | 7,000 | |
| Equipment | 25,000 | |
| Investment in D & C Corporation Stock | 175,000 | |
| Accounts Payable | 40,000 | |
| Cash | 50,000 | |
| Accounts Receivable | 22,000 | |
| Inventory | 48,000 | |
| Equipment | 95,000 | |
| Disney, Capital | 1,19,000 | |
| Charles, Capital | 56,000 | |
| Investment in D & C Corporation Stock | 1,75,000 | |
b)
| Cash | 50,000 | |
| Accounts Receivable | 22,000 | |
| Inventory | 48,000 | |
| Equipment | 95,000 | |
| Accounts Payable | 40,000 | |
| Common Stock | 120,000 | |
| Additional Paid-In Capital | 55,000 | |
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