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How much is the adjusted capital of Katy

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Question - 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.

Q1. How much is the adjusted capital of Katy?

$950,000

$1,007,600

$1,242,400

$992,400

Q2. How much should Perry contribute to the partnership?

$297,720

$302,280

$372,720

$285,000

Q3. How much is the total assets of the partnership after the formation?

$1,342,400

$1,389,080

$1,357,600

$1,390,120

Reference no: EM132804347

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