When disney and charles decided to incorporate their partnership, the trial balance was as follows:
debit credit
cash $ 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.