Reference no: EM132768112
Problem - Romero admits Peter as a partner in business. Accounts in the ledger of Romero on December 1, 1999, just before the admission of Peter, show the following balances;
Cash $23,000
Accounts Receivable $60,000
Merchandise Inventory $90,000
Accounts Payable $41,000
Romero, Capital $132,000
It was agreed that for purposes of establishing Romero's interest, the following adjustments should be made;
a. An allowance for doubtful accounts of 5% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at $102,500.
c. Prepaid expenses of $3,750 and accrued liabilities of $4,750 are to be established.
Peter is to invest sufficient funds in order to receive a 30% interest in the partnership.
Required - Assuming that the partners use the book of Romero as the partnership's books, prepare all necessary entries.