Question

Barton and Fallows form a partnership by combining the assets of their separate businesses. Barton contributes accounts receivable with a face amount of $47,000 and equipment with a cost of $186,000 and accumulated depreciation of $98,000. The partners agree that the equipment is to be valued at $85,000, that $3,000 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $1,700 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Fallows contributes cash of $28,000 and merchandise inventory of $55,500. The partners agree that the merchandise inventory is to be valued at $60,000. Journalize the entries to record in the partnership accounts (a) Barton's investment and (b) Fallows's investment.

Answer 1

Answer:

A. Dr Equipment $85,000

DrAccounts receivables 44,000

Cr To Allowance for doubtful accounts $1,700.00

Cr To Barton's capital $127,300

B. Dr Cash $28,000.00

Dr Merchandise inventory $60,000.00

Cr To Fallows capital 88,000

Explanation:

a. Preparation of the journal entry for Barton's investment

Dr Equipment $85,000

DrAccounts receivables 44,000

(47,000-3000)

Cr To allowance for doubtful accounts $1,700

Cr To Barton's capital $127,300

(85,000+44,000-1,700)

(To record Barton contribution in partnership)

b .Preparation of the journal entry for Fallows's investment.

Dr Cash$28,000.00

Dr Merchandise inventory $60,000.00

Cr To Fallows capital 88,000

(60,000+28,000)

(To record Fallows contribution in partnership)