Question

Brief Exercise 12-1 Barbara Ripley and Fred Nichols decide to organize the ALL-Star partnership. Ripley invests $27,000 cash, and Nichols contributes $18,000 cash and equipment having a book value of $6,300. Prepare the entry to record Nichols’s investment in the partnership, assuming the equipment has a fair value of $9,000.

Answer 1

Answer:

The journal entry is as follows:

Cash A/c Dr. $18,000

Equipment (Fair value) A/c Dr. $9,000

           To N's  capital                            $27,000

(To record the investment bought by Nichols)

Workings:

Cash contributed by Nichols = $18,000

Equipment's Book value = $6,300

Fair value of equipment = $9000

Nichols capital = $18,000 + $9,000

                         = $27,000