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

In the Books of Wendy & Sonia Auto Repair
Date	General Journal		Debit	Credit
			Amount in $	Amount in $
January 15, 2017	Cash		8600
	Accounts Receivable		4700
	Equipment		7200
		Accounts Payable		4200
		Windy Reichstein, Capital		16300	Balancing Figure
	To record the introduction of capital by Windy Reichstein.
January 15, 2017	Cash		2100
	Accounts Receivable		28700
	Equipment		10000
		Accounts Payable		8600
		Notes payable		15000
		Salary payable		1100
		Sonia Dutta, Capital		16100	Balancing Figure
	To record the introduction of capital by Sonia Dutta