How the cash settlement should be made

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Reference no: EM132789869

Sunny and Gloomy contributed the following in the formation of a partnership business:

Sunny

Cash 180,000

Accounts Receivale 100,000

Inventory 160,000

Total 440,000

Groomy

Land (at historical cost) 340,000

Total: 340,000

Additional information:

  1. Only 60% of the accounts receivable is recoverable.
  2. The net realizable value of the inventory is 120,000. Sunny acquired the inventory on account; the partnership will assume the unpaid balance of 60,000.
  3. The land has fair value of 600,000

Sunny and Gloomy agreed to have equal credits to their capital accounts. Cash settlement is to be made between the partners for the adjustments on their capital balances.

Requirement:

Question 1: Describe how the cash settlement should be made and how it would be accounted for in the partnership books.

Reference no: EM132789869

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