PARTNERSHIP INTO A CORPORATION
INTO A CORPORATION
1. BEFORE THE INCORPORATION THE BALANCE SHEET ACCOUNTS SHALL BE REVALUED.
2. PARTNERSHIP BOOKS MAY STILL BE USED. OR MAY USE ENTIRELY NEW SET O BOOKS.
IF PARTNERSHIP BOOK IS USED:
1. A TEMPORARY ACCOUNTS SHALL BE USED TO ACCUMULATE ALL ADJUSTMENT DUE TO REVALUATION. AFFECTING CAPITAL ACCOUTNS.
2. RECORD SUBSCRIPTION RECEIVABLE OF THE PARTNERS
4. OFFSET CAPITAL ACCOUNT FOR THE SUBSCRIPTION RECEIVABLE
IF NEW SET OF BOOKS IS USED
1.. CLOSING THE BOOKS:
METHOD 1 STOCK DISTRIBTION NOT SHOWN.
A. revalue the assets.
b. closing entry
liability.................
capital................
assets.............................
METHOD 2 STOCK DISTRIBUTION SHOWN.
A. REVALUE THE ASSETS.
B. TRANSFER ASSETS , LIAB.. TO THE CORPORATION
2. OPENING OF NEW BOOKS OF CORPORATION
A. RECORD THE SUBSCRIPTION
B. TRANSFER OF BALANCE SHEET ACCOUNTS TO THE CORPORATION IN OFSSET TO SUBSCRIPTION..
METHOD 1
ILUSTRATION:
JORGE JAMES ENT.
BALANCE SHEET
CASH 200,000 A/PAYABLE 120,000
NOTES PAYABLE 100,000
A/R 300,000 ALLO. DEPN 3000
INVENTRY 150,000 BAD DEBTS 20,000
FIXED ASSETS 30,000
JAMES 305,900
JORGE 131,100
TOTAL 680,000 680,000
james 70% , jorge 30%
THE FOLLOWING SHALL BE INCORPORATORS:
JAMES, JORGE, BON, JACK, JIM. AUTHORIZED CAP STOCK OF 2M, divided into 20,000 shares at 100.00 par value. THEY WANT THIER COMPANY TO BE ENAMEL CORPO.
1 the valuation shall be readjusted.
a. bad debts to increase by 5,000
b. inventory to be valued at 170,000
c. fixed assets revalued to 50,000 and depreciated 5,000 by 25%.
d. goodwill 50,000 to be recorded
2. subscription as ff:
JAMES 3O00 SHARES
JORGE 1,300
BON 300
JACK 500
JIM 400
3. THE partnership shall refund any partner any excess of his capital over his subscripion
require:
A. opening entries to effect incorporation , assuming partnership books is used.
B. entries using new set of books
A. USING OF PRESENT BOOKS
entry 1
inventory 20,000
goodwil 50,000
fixed assets 20,000
accu. depn 2,000
ALLO. bad debts 5,000
james capt 58,100
jorge capital 24,900
to revalue the assets of partnership.
entry 2 to refund the partners due to excess of capital over subscription
JAMES SUBSCRIPTION 3.000 X 100.00 = 300,000
FINAL CAPITAL 305,900 + 58100 364,000
EXCESS OF CAPITAL JAMES 64,000
JORGE SUBSCRIPTION 1300X 100 130,000
FINAL CAPITAL 131,100 + 24,900 156,000
EXCESS 26,000
JAMES CAP 64,000
J0RGE CAP 26,000
CASH 90,000
to pay the partners of their excess of capital over their subscription
entry no. 3
subscription receivable 430,000
subscribed capital stock 430,000
to record subscription of the partners.
entry 4.
JAMES CAPITAL 300,000
J0RGE CAPITAL 130,000
SUBSCRITION RECEIVBLE 430,000
to use the final capital balance of the partners to pay for their subscription.
entry 5.
cash 800,000
subsc capital stock 800,000
to record payment of subscribed capital stock
entry 6 subs, captal stock 800,000
\ capital stock 800,000
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B 1. . entries on partnership books if stock distribution not shown
1. of course , the same entry for the revaluation
2. refund of any excess capital vis vis subscription
3. the assets and liabilities shall be closed:
entry 3
accts payable 120,000
notes payable 100,000
accu. dpen 5,000
res. bad debts 25,000
JAMES CAPITAL 300,000
JORGE CAP 130,000
accts rece 300,000
inventory 170,000
fixed assets 50,000
goodwill 50,000
cash 110,000
to close assets and liabilities and paid cash to james and jorge for their capital using partnership books
B 2 STOCK DISTRIBUTION SHOWN.
same entry 1, 2,
THE NO. 3 entry is almost same , only instead of DEBIT CAPITAL OF PARTNERS , DEBIT THE NAME OF CORPORATION
entry no. 4.
STOCKS OF ENAMEL CORPORATION 430,000
ENAMEL CORPORATION 430,000
to close the open account of enamel corporation PER entry no. 3 and replace by the value of stocks under STOCKS OF ENAMEL.
JAMES CAPITAL 300,000
JORGE CAP 130,000
STOCKS OF ENAMEL CORPORATION 430,000
to close the account stocks of enamel corp. and close the capital accounts
ENTRIES NOW ON THE BOOKS OF THE CORPORATION.
1. entry 1. SUBSCRIPTION RECEIVABLE 550,000
. CAPITAL STOCK 550,000
TO record subscription for 5500 shares.
entry 2.
CASH 110,000
GOODWILL 50,000
FIXED ASSETS 50,000
INVENTORY 170,000
ACCTS.RECE 300,000
ACCTS PAY 120,000
NOTES PAYABLE 100,000
DEPN 5,000
BAD DEBTS 25,000
SUBSCRIPTION RECEIVABLE 430,000
TO record the assets and liabilities of the partnership and use these as their payment for their subscription.
entry 3.
CASH 120,000
SUBSCRIPTION RECEIVABLE 120,000
TO record payment of the other incorporators of their subscrition.
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