The partnership balance sheet at the time of the sale was:
| Assets | Liabilities | ||
| Land and Buildings | $200,000.00 | Notes Payable | $100,000.00 |
| Cash | 10,000.00 | Accounts Payable | 40,000.00 |
| Inventories | 100,000.00 | Brown’s Capital | 210,000.00 |
| Accounts Receivable | 150,000.00 | Smith’s Capital | 210,000.00 |
| Machinery and Equipment | 100,000.00 | ||
| $560,000.00 | $560,000.00 | ||
For the purpose of providing working capital, the partnership donated $300,000 of the capital stock to the corporation, which was sold at $50 per share.
You are required to:
(a) Close the partnership books, showing ledger accounts of partners only.
(b) Open the corporation books.
(c) Prepare a balance sheet of the corporation before sale of donated stock.
(d) Prepare a balance sheet after sale of donated stock.
4. Before making the charges referred to below, the Profit and Loss account of a corporation for the year shows a credit balance of $60,000. The accounts receivable are $40,700, and the plant and machinery account is $55,000. The 6% preferred stock is $50,000, and the common stock $150,000. It is decided:
1. To provide out of the above-named profit and loss balance 7½% depreciation on plant and machinery.