_Balance Sheet of Wilson, Brackett, and Nixon_ _Assets_ Cash $1,650.72 Bills receivable $1,725.00 Accounts receivable 3,264.18 4,989.18 -------- Merchandise inventory 10,450.00 Furniture and fixtures 4,000.00 14,450.00 $21,089.90 -------- -------- _Liabilities_ Bills payable 3,000.00 Accounts payable 2,089.00 5,089.90 -------- Wilson, capital account 7,000.00 Brackett, capital account 5,000.00 Nixon, capital account 4,000.00 16,000.00 21,089.90 -------- -------- From this balance sheet it is seen that the net capital is $16,000.00, of which Wilson owns $7,000.00, Brackett, $5,000.00, and Nixon, $4,000.00. On this showing, it is decided to form the company with a capital stock of $20,000.00, all of which is to be issued as full paid stock to the partners in proportion to their interests in the partnership. New books are opened for the corporation and the next step is to transfer the accounts of the partnership to the corporation. An account is opened in the partnership ledger with the Continental Clothing Company and the following entry is made: Continental Clothing Co. $21,089.90 Cash $1,650.72 Bills receivable 1,725.00 Accounts receivable 3,264.18 Merchandise inventory 10,450.00 Furniture and fixtures 4,000.00 The above entry closes all of the asset accounts and shows that they have been transferred to the new company. The next entry is: Bills payable $3,000.00 Accounts payable 2,089.90 Wilson 7,000.00 Brackett 5,000.00 Nixon 4,000.00 Continental Clothing Co. $21,089.90 The above entry closes the liability and partners' accounts showing that they have been transferred to the new company and also closes the account of the Continental Clothing Co. =39. Entries on the Corporation Books.= We are now ready to open the books of the new company. Subscription books are opened and the following subscriptions are received: Wilson 8,750.00 Brackett 6,250.00 Nixon 5,000.00 The net assets of the partnership are $4,000.00 less than the capital stock of the new company. No money is to be invested to cover this discrepancy, so it will be necessary to account for it on the books by opening a fictitious asset account under some such name as _goodwill_. Having made this provision, the books of the new company are opened by the following entries: