Question

Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $47,000 and equipment with a cost of $178,000 and accumulated depreciation of $102,000. The partners agree that the equipment is to be valued at $68,400, that $4,000 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,200 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $20,500 and merchandise inventory of $45,000. The partners agree that the merchandise inventory is to be valued at $48,500.

Answer 1

Journal

(a)	Accounts receivables	43,000
	Equipment	68,400
	Allowance for doubtful accounts		2,200
	Capital, Jesse		109,200
(b)	Cash	20,500
	Merchandise inventory	48,500
	Capital, Tim		69,000

a) Investment by Jesse = (Face value of Accounts receivables - Worthless receivables - Allowance for doubtful accounts) + Fair value of equipment

= (47,000 - 4,000 - 2,200) + 68,400

= $109,200

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