Question

Charlie and Zoe form a partnership on 1 July 2020. Charlie agrees to bring in $100,000 of cash and inventory with a market value of $73 000.

Zoe, who has been trading as a sole trader, is to invest certain business assets at agreed market valuations and also transfer his business liabilities. Details of her assets and liabilities and their agreed valuations, are as follows:

	Book value in Zoe's records	Agreed market value
Cash	$34 000	$34 000
Inventory	$60 000	$66 000
Equipment	$50 000	$56 000
Accounts receivable	$60 000	$50 000

Prepare the appropriate journal entries to set up the partnership on 1 July 2020.

Answer 1

Solution:

Journal Entries
Date	Particulars	Debit	Credit
1-Jul	Cash Dr	$100,000.00
	Inventory Dr	$73,000.00
	To Charlie's capital		$173,000.00
	(To record asset invested in business)
1-Jul	Cash Dr	$34,000.00
	Inventory Dr	$66,000.00
	Equipment Dr	$56,000.00
	Accounts receivables Dr	$50,000.00
	To Zoe's capital		$206,000.00
	(To record asset invested in business)