Question

Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $100,000 and equipment with a cost of $360,000 and accumulated depreciation of $200,000. The partners agree that the equipment is to be valued at $116,000, that $7,000 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $4,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $42,000 and merchandise inventory of $89,000. The partners agree that the merchandise inventory is to be valued at $96,000.

Required: Journalize the entries to record in the partnership accounts

a) Jesse’s investment and

b) Tim’s investment

Answer 1

A.Jesse's Investment

No	Account Title and Explanation	Debit	Credit
1	Accounts Receivable ($100,000 - $7,000)	$93,000
	Equipment	$116,000
	Allowance for Doubtful Account		$4,000
	Jesse's Capital		$205,000
	(To record the capital introduced by Jesse)

B.Tim's Investment

No	Account Title and Explanation	Debit	Credit
1	Cash	$42,000
	Merchandise Inventory	$96,000
	Tim's Capital		$138,000
	(To record the capital introduced by Tims)