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 $182,000 and accumulated depreciation of $95,000. The partners agree that the equipment is to be valued at $67,900, that $4,000 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,500 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $20,500 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be valued at $48,000. Journalize the entries to record in the partnership accounts (a) Jesse's investment and (b) Tim's investment. If an amount box does not require an entry, leave it blank. (a) (b)__

Answer 1

1. Partnership of Jesse and Tim:

Following journal entries will be passed in books of partnership firm-

Date	Particulars	Debit	Credit
a)	Equipment	$67,900
	Accounts Receivable	$43,000
	Jesse's Capital		$108,400
	Allowance for Doubtful Debt		$2,500
	(Jesse's Investment in from of Equipment (at the mutually decided value of $67,900) and Accounts Receivable ($47000 Less $4000 of Bad debt) admitted to Partnership.)
b)	Cash	$20,500
	Merchandise Inventory	$48,000
	Tim's Capital		$68,500
	(Tim's investment in form of Cash and Merchandise Inventory (at the mutually decided value of $48,000))
		$179,400	$179,400

2. Partnership of Rodgers and Winter:

a. Division of Net income of $110,000 between Rodgers and Winter:

(Interest Allowance : For Rodgers ($60,000 X 12% = $7,200) and Winter ($90,000 X 12% = $10,800))

Net Income	$110,000
	Rodgers	Winter	Total
Division of Net Income:
Salary Allowance	$25,000	$30,000	$55,000
Interest Allowance	$7,200	$10,800	$18,000
Total	$32,200	$40,800	$73,000
Residual Net Income	$18,500	$18,500	$37,000
Net Income	$50,700	$59,300	$110,000

b. Net income = $65,000

Net Income	$65,000
	Rodgers	Winter	Total
Division of Net Income:
Salary Allowance	$25,000	$30,000	$55,000
Interest Allowance	$7,200	$10,800	$18,000
Total	$32,200	$40,800	$73,000
Residual Net Income	$(4,000)	$(4,000)	$(8,000)
Net Income	$28,200	$36,800	$65,000