Question

Dave Krug contributed $1,400 cash along with inventory and land to a new partnership. The inventory had a book value of $1,200 and a market value of $2,800. The land had a book value of $1,800 and a market value of $5,800. The partnership also accepted a $3,400 note payable owed by Krug to a creditor. Prepare the partnership's journal entry to record Krug's investment
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No Transaction General Journal Debit Credit
Cash

Answer 1

Answer:

Partnership General Journal to record Krug Investment

Cash                $1,400   (Debit)

Inventory         $2,800  (Debit)

Land                 $5,800  (Debit)

Notes Payable $3,400  (Credit)

Krug, Capital    $5,800  (Credit)

Explanation

i. The land and inventories will be accepted at his market value.

ii. Along with cash, this are assets which enter the partnership so they are debited.

iii. The note payable decreases the Krug capital contribution. It is credited.

iv. Krug capital account balance will be to complete the entry and make debit = credit.