Question

Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be valued at $58,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be valued at $48,000.
Required:
Journalize the entries to record in the partnership accounts (a) Jesse’s investment and (b) Tim’s investment. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer:

                               Jesse's Investment

Journal Entries to record in the Partnership accounts

Account Titles                                         Debit               Credit

Accounts Receivable                              $46,500

($50,000 - $3,500)

Equipment(Agreed Price)                       $58,000  

Allowance for Doubtful Debts                                            $2,000

Jesse Capital Account                                                       $102,500

(Balancing Figure)

                               Tim's Investment

Journal Entries to record in the Partnership accounts  

Account Name                            Debit             Credit

Cash                                             $21,000

Inventory (At Agreed price)        $48,000  

Tim Capital                                                          $69,000