In: Accounting
Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $45,000 and equipment with a cost of $180,000 and accumulated depreciation of $99,000. The partners agree that the equipment is to be valued at $68,200, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,100 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $22,000 and merchandise inventory of $45,500. The partners agree that the merchandise inventory is to be valued at $49,000.
Journalize the entries to record in the partnership accounts (a) Jesse's investment and (b) Tim's investment. If an amount box does not require an entry, leave it blank.
(a) | |||
(b) | |||
In Jesse and Tim Partnership Books:
Jesse’s investment:
Accounts receivable $45000, of which $3500 is to be immediately written off due to non-collectability and another $2100 must be provided by way of an allowance for uncollectibles.
Value of A/R = $45000 - $3500 = $41500
Equipment cost: $180000
Accumulated depreciation: $99000
Written down value: $180000 - $99000 = $81000
A decrease in value of the equipment is to be accounted for worth $12800 in order to make it to $68200
Tim’s Investment:
Cash $22000
Inventory having a book value of $45500 is to be raised to $49000 for incorporation into the books.
Journal:
Jesse:
Accounts receivable Dr. $41500
Equipment Dr. $68200
Capital, Jesse $109700
Tim:
Cash Dr. $22000
Inventory Dr. $49000
Capital, Tim $71000