The trial balance of WM Partnership is as follows:
Wilfred and Mike decide to incorporate their partnership.The partnership's books will be closed,and new books will be used for W & M Corporation.The following additional information is available:
1.The estimated fair values of the assets follow:
2.All assets and liabilities are transferred to the corporation.
3.The common stock is $10 par.Wilfred and Mike receive a total of 10,000 shares.
4.The partners share profits and losses in the ratio 7:3.
-Based on the preceding information,the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred,Capital for:

Question

The trial balance of WM Partnership is as follows:
  Wilfred and Mike decide to incorporate their partnership.The partnership's books will be closed,and new books will be used for W & M Corporation.The following additional information is available:
1.The estimated fair values of the assets follow:
  2.All assets and liabilities are transferred to the corporation.
3.The common stock is $10 par.Wilfred and Mike receive a total of 10,000 shares.
4.The partners share profits and losses in the ratio 7:3.
-Based on the preceding information,the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred,Capital for:

Quizplus · Accepted Answer

The total number of shares issued is 10,000 with a par value of $10 per share, which means the common stock issued is $100,000 ($10 x 10,000). Since the profits and losses are shared in a 7:3 ratio, Wilfred's share is 7/10 of the total or $70,000, and Mike's share is 3/10 or $30,000. Therefore, the journal entry should reflect a credit to Common Stock for $100,000 and a debit to Wilfred, Capital for $86,700 ($70,000 + $16,700 = $86,700). The $16,700 is the difference between the estimated fair value of total assets ($400,000) and the total partnership capital ($313,300).

The Trial Balance of WM Partnership Is as Follows