Reference no: EM132737807
KATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts:
Cash - ?420,000;
Accounts receivable -?380,000;
Inventories -?250,000;
Notes payable -?100,000.
PERRY agreed to contribute cash equal to 30% of KATY's capital after considering the following adjustments:
(a) 2% allowance for bad debts should be recognized,
(b) the inventories have fair market value equal to 120% of the balance.
Problem 1: How much is the adjusted capital of Katy?
A) ? 1,007,600
B) ? 992,400
C) ? 1,242,400
D) ? 950,000