Kimberly Payne and Arionna Maples decide to form a partnership by combining the

Question

Kimberly Payne and Arionna Maples decide to form a partnership by combining the assets of their separate businesses. Payne contributes the following assets to the partnership: cash, $24,560; accounts receivable with a face amount of $161,390 and an allowance for doubtful accounts of $4,490; merchandise inventory with a cost of $84,060; and equipment with a cost of $137,580 and accumulated depreciation of $45,680. The partners agree that $6,080 of the accounts receivable are completely worthless and are not to be accepted by the partnership, that $4,680 is a reasonable allowance for the uncollectibility of the remaining accounts, that the merchandise inventory is to be recorded at the current market price of $99,950, and that the equipment is to be valued at $89,040. On December 1, journalize the partnership’s entry to record Payne’s investment. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

Solution:

Journal Entries Event Particulars Debit Credit 1 Cash Dr $24,560.00 Accounts receivables Dr ($161,390 - $6,080) $155,310.00 Merchandise inventory Dr $99,950.00 Equipment Dr $89,040.00           To Allowance for doubtful accounts $4,680.00           To Payne's Capital $364,180.00 (To record Payne investment in partnership)

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