How much is the Justed capital saran on Jul 20167 2. How much cash will Matteo invest? 3. What is the total amount of cash at the date of formation? 4. What is total amount if assets at the date of formation? 5. What is the total amount of liabilities at the date of formation?
How much is the Justed capital saran on Jul 20167 2. How much cash will Matteo invest? 3. What is the total amount of cash at the date of formation? 4. What is total amount if assets at the date of formation? 5. What is the total amount of liabilities at the date of formation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Problem 1
Transcribed Image Text:PROBLEM I
On July 25, 2018 Sarah and Matteo decided to form a partnership. Below is the Statement of Financial Position of Sarah on June 30,
2018:
Assets
Cash
800,000
Accounts Receivable
2,400,000
Merchandise Inventory
4,000,000
Equipment
7,200,000
Total
14.400.000
Liability and Equity
Accounts Payable
3,000,000
Notes Payable
5,000,000
Sarah, Capital
6,400,000
Total
14.400.000
They agreed on the following at the date of formation:
> The Accounts Receivable is 88% collectible.
> The current fair value of the Merchandise Inventory is 4,800,000.
> Equipment is overvalued by 600,000.
> Prepaid expenses of 275,000 and accrued expenses of 125,000 are to be recognized.
> Matteo will invest sufficient cash for a 25% interest in the partnership.
1. How much is the adjusted capital of Sarah on July 25, 2018?
2. How much cash will Matteo invest?
3. What is the total amount of cash at the date of formation?
4. What is total amount if assets at the date of formation?
5. What is the total amount of liabilities at the date of formation?
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