Gentry, sole proprietor of a hardware business, decides to form a partnership wi

Question

Gentry, sole proprietor of a hardware business, decides to form a partnership with Noel. Gentry’s accounts are as
follows:

Book Value / Market Value

Cash $ 20,000/ $ 20,000

Accounts Receivable (net) 52,000 / 45,000

Inventory 112,000 /125,000

Land 40,000 / 100,000

Building (net) 300,000 / 340,000

Accounts Payable 25,000 / 25,000
Mortgage Payable 75,000 / 75,000

*Noel agrees to contribute $70,000 for a 20% interest. Journalize the entries to record (a) Gentry’s investment and (b) Noel’s investment.

Explanation / Answer

(a) Cash 20,000 Accounts Receivable 45,000 Inventory 125,000 Land 100,000 Building 340,000 Accounts Payable 25,000 Mortgage Payable 75,000 Gentry, Capital 530,000 (b) Cash 70,000 Gentry, Capital 50,000 Noel, Capital 120,000

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