Question

1 Prepare the journal entries to set up the partnership as at 1 May 2020.

2 prepare a classified Balance Sheet of the partnership as at 1 May 2020.

Michelle and Peter form a partnership on 1 May 2020.

Michelle agrees to bring in $250,000 of cash.

Peter, 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 Peter’s assets and liabilities and their agreed valuations, are as follows:

	Book value	Market value
Cash	$30,000	$30,000
Accounts Receivable	$150,000	$120,000
Inventory	$82,000	$76,000
Land	$150,000	$200,000
Equipment	$45,000	$24,000
Accounts payable	$40,000	$40,000
Loan payable (due 2040)	$50,000	$50,000

Answer 1

1.)	Journal Entrires
			Amount in $
	Date	Account Titles	Debit	Credit
	01-05-2020	Cash	250,000
		Michelle , Capital		250,000
	01-05-2020	Cash	30,000
		Accounts Receivable	120,000
		Inventory	76,000
		Land	200,000
		Equipment	24,000
		Accounts Payable		40,000
		Loan payable (due 2040)		50,000
		Peter , Capital		360,000

2.)	Classified Balance Sheet as at May 1,2020
	Assets	Amount in $
	Non-current assets
	Property, Plant & Equipment
	Land	200,000
	Equipment	24,000
	Current assets
	Cash	280,000
	Accounts Receivable	120,000
	Inventory	76,000
	Total Assets	700,000
	Equity & Liabilities
	Partner's Capital
	Michelle , Capital	250,000
	Peter , Capital	360,000
	Non Current Liabilities
	Loan payable (due 2040)	50,000
	Current Liabilities
	Accounts Payable	40,000
	Total Equity & Liabilities	700,000