Penner and Torres decide to merge their proprietorships into a partnership calle

Question

Penner and Torres decide to merge their proprietorships into a partnership called Pentor Company. The balance sheet of Torres Co. shows: Accounts receivable $83,400 Less: Allowance for doubtful accounts 5,838 $77,562 Equipment 59,200 Less: Accumulated depreciation—equip. 20,720 38,480 The partners agree that the net realizable value of the receivables is $70,056 and that the fair value of the equipment is $32,560. Indicate how the accounts should appear in the opening balance sheet of the partnership.

Explanation / Answer

We will take the assets on fair market value :

This is less than the book value.

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