Question

4) Accounting for partner contributions, allocating profits and losses to the partners, partnership financial statements On May 1, 2017. BJ and Paige formed a partnershin Fach contributed assets with the following upon valuations. BJ Paige Cash $80,000 $20,000 Equipment 50,000 60,000 Building 240,000 Loan payable 0 100,000 Prepare a separate journal entry to record each partner's contributions. Date Accounts and Explanation Debit Credit

Answer 1

The below are the journal entries:

Ledger Name		Debit	Credit
Cash A/c	dr	$80,000
Equipment A/c	dr	$50,000
To BJ Capital A/c			($130,000)
(Being Capital Brought in by BJ)
Cash A/c	dr	$20,000
Equipment A/c	dr	$60,000
Building A/c	dr	$240,000
To Loan Payable A/c			($100,000)
To Paige Capital A/c			($220,000)
(Being Capital Brought in by Paige)

The capital entry of BJ is very simple, i.e cash and equipment are brought in and thus debited and capital is credited based on business entity concept of accounting.(Business and owner are different)

The capital entry of paige involves a loan payable and thus the entry for assets and loan has to be passed in the normal way (using double entry system) and the balancing figure would be capital of paige brought in. In simple terms paige brought in $220,000 capital and borrowed $100,000 from a bank in the name of the partnership to bring in the assets in his name.