Question

Wendy Reichstein and Sonia Datta operate separate auto repair shops. On January 15, 2017, they decide to combine their businesses, which had been operated as proprietorships, to form Wendy & Sonia Auto Repair, a partnership. Information from their separate balance sheets is presented below:

		Wendy Auto Repair		Sonia Auto Repair
Cash		$8,600		$2,100
Accounts receivable		7,500		31,500
Allowance for doubtful accounts		800		1,500
Accounts payable		4,200		8,600
Notes payable		-		15,000
Salaries payable		-		1,100
Equipment		8,700		28,000
Accumulated depreciation - equipment		2,200		16,000

It is agreed that the expected realizable value of Wendy's accounts receivable is $4,700 and Sonia's receivables is $28,700. The fair market value of Wendy's equipment is $7,200 and Sonia's equipment is $10,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the note payable on Sonia's balance sheet, which she will pay herself.

Prepare the journal entries necessary to record the formation of the partnership.

Answer 1

Solution:

The journal entries necessary to record the formation of the partnership.

Date	Account titles and explanation	Debit($)	Credit($)
Jan 15	Cash A/c Dr	$8,600
	Equipment A/c Dr	$7,200
	Account receivable A/c Dr	$4,700
	To Accounts payable A/c		$4,200
	To Wendy reichstein, capital		$16,300
Jan 15	Cash A/c Dr	$2,100
	Account receivable A/c Dr	$28,700
	Equipment A/c Dr	$10,000
	To Accounts payable A/c		$8,600
	To salary payable A/c		$1,100
	To notes payable A/c		$15,000
	To Sonia Datta capital A/c		$16,100