Question

Trevor Smith contributed equipment, inventory, and $48,000 cash to a partnership. The equipment had a book value of $25,000 and a market value of $28,000. The inventory had a book value of $70,000, but only had a market value of $30,000, due to obsolescence. The partnership also assumed a $14,500 note payable owed by Smith that was used originally to purchase the equipment.

Required:

Provide the journal entry for Smith’s contribution to the partnership. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Ans:

Date	Account Titles	Debit	Credit
	Cash	$48,000
	Inventory	$30,000
	Equipment	$28,000
	Notes Payable		$14,500
	Trevor Smith, Capital (48,000 + 30,000 + 28,000 - 14,500)		$91,500
	(Entry to Record Smith’s contribution to the partnership)

Note:

1)cash and Equipment , inventory recorded at market value these are assets to partnership so these are debited and

2)Smith owed by $14,500 on purchase of equipment this is liability for partnership so it is credited

3)Balance after deducting notes payable from total contributions is recorded as Trevor Smith capi