Question

Kimberly Payne and Arionna Maples decide to form a partnership by combining the assets of their separate businesses. Payne contributes the following assets to the partnership: cash, $20,000; accounts receivable with a face amount of $145,000 and an allowance for doubtful accounts of $4,200, merchandise inventory with a cost of $92,000, and equipment with a cost of $136,000 and accumulated depreciation of $45,000. The partners agree that $5,000 of the accounts receivable are completely worthless and are not to be accepted by the partnership, that $4,400 is a reasonable allowance for the uncollectibility of the remaining accounts, that the merchandise inventory is to be recorded at the current market price of $101,700, and that the equipment is to be valued at $81,200
On December 1, journalize the partnership's entry to record Payne's investment Refer to the Chart of Accounts for exact wording of account titles

Answer 1

Answer:

The Journal entry for the Payne's investment is as follows:

On December 1,

Cash A/c                              Dr. $20,000.00

Accounts Receivables A/c Dr. $140,000.00

Inventory A/c                       Dr. $101,700.00

Equipment A/c                     Dr. $81,200.00

To Allowance for doubtful Accounts            $4,400.00

To Payne's Capital A/c                                   $338,500.00

(Being assets contributed by partner in business)

Workings:

Accounts Receivables = $145,000 - $5,000

                                      = $140,000