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Problem III

     Pence Corporation purchased an automobile on January 1, 2018 for $25,000. On January 1, 2020, the Accumulated Depreciation account for the automobile showed a credit of $10,000. Pence sold the automobile that very day for $12,000.

     Required:

      Make the journal entry for Pence Corporation for the 1/1/20 sale.

Problem IV:

      On January 1, 2020 Barr and Sessions decided to form a partnership called BS Associates. Barr contributed Cash $65,000; Equipment which originally cost $30,000 and accumulated depreciation of $16,000 and whose market value that date was $11,000; and Accounts Payable of $5,000. Sessions contributed Cash $20,000; and land which was purchased for $100,000 ten years ago but is now worth $180,000. There is also a mortgage of $50,000 on the land.

      Required:

     Make the journal entries for the formation of the partnership on 1/1/20.

Answer 1

Answer :

(III).

Cost of Automobile on January 1.2018 = $25,000

Accumulated depreciation on January 1.2020 = $10,000

Book vavlue of automobile at Jan 1.2020 = Cost of Automobile on January 1.2018 - Accumulated depreciation on January 1.2020

= 25,000 - 10,000

= $15,000

Sale price of automibile = $12,000

Loss on sale of automobile = Book value of automobile at January 1.2020 - Sale price of automobile

= 15,000 - 12,000

= $3,000

Date	Account Title and Explantion	Debit	Credit
1-1-2020	Cash	$12,000	-
	Accumulated depreciation - Automobile	$10,000	-
	Loss on sale of Automobile	$3,000	-
	Automobile	-	$25,000
	(To Record sale of automobile)	-	-

(IV).

-	Barr :	-	-
Date	Account Title and Explanation	Debit	Credit
	Cash	65000	-
	Equipment	11000	-
	Account payable	-	5000
	Barr, Capital	-	71000
	(Being Barr investment recorded)	-	-
	Sessions :	-	-
	Cash	20000	-
	Land	180000	-
	Mortagage on land	-	50000
	Sessions, capital	-	150000
	(Being Sessions investment recorded)	-	-

Note : At the time of formation of partnership assets contributed are recorder at fair market value. Due to this reason Equipment and Land market value has been taken.

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