Investment by partners; financial statements.
Abram, Haas, and Tidwell formed a partnership to practice law by combining their respective sole proprietorships. The assets and liabilities contributed to the firm on January 2, 19X4, the date of formation, follow.
| Book Value | Fair Market Value | |
| Abram | ||
| Land | 40,000 | 115,000 |
| Mortgage payable | 38,000 | 38,000 |
| Haas | ||
| Office supplies | 42,000 | 30,000 |
| Office equipment | 64,000 | 48,000 |
| Tidwell | ||
| Cash | 50,000 | 50,000 |
| Accounts | 20,000 | 18,000 |
| Short-term investments | 4,000 | 4,000 |
Instructions:
a. Prepare journal entries to record the investments of Abram, Haas, Tidwell in the new partnership.
b. Prepare a classified balance sheet for the partnership immediately after the investments are recorded.
c. The partners share profits and losses equally, and the first year’s n income was $66,000.
Cash withdrawals of $5,000 were made by Abram,$22,000 by Haas, and $17,000 by Tidwell. Prepare the December 31 19X4, statement of partners’ equity for the firm.
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