Question

Lou Ross, Red Galley and Barbara Roberts formed the RGR Partnership on January 1, 2015. The partners invested assets and liabilities into the partnership as follows:

Fair

                                                                           Market Value

Lou Ross:

              Cash                                                           $   95,000

              Accounts Receivable                                    21,000

Red Galley:

              Cash                                                               120,000

              Vehicle                                                             19,000

              Loan payable (on the vehicle)                   10,000

Barbara Roberts:

              Cash                                                                 50,000

              Office equipment                                          90,000

The partnership earned a profit of $ 180,000 during this first year of operation.

Partners’ withdrawals for Ross, Galley, and Roberts amounted to $15,000, $20,000 and $23,000, respectively.

Required:

1. Prepare the journal entry to record the formation of the partnership.

Answer 1

Journal Entry
Particulars			Debit	Credit
Cash			$ 2,65,000.00
Accounts Receivable			$    21,000.00
Vehicle			$    19,000.00
Office Equipment			$    90,000.00
To Loan Payable				$    10,000.00
To Lou Ross, Capital				$ 1,16,000.00
To Red Galley, Capital				$ 1,29,000.00
To Barbara Roberts, Capital				$ 1,40,000.00

Workings:

Workings:
		Cash	A/R	Vehicle	Equipment	Loan Payable	Total
Lou Ross		$    95,000.00	$ 21,000.00	$               -	$               -	$                 -	$ 1,16,000.00
Red Galley		$ 1,20,000.00	$               -	$ 19,000.00	$               -	$ -10,000.00	$ 1,29,000.00
Barbara Roberts		$    50,000.00	$               -	$               -	$ 90,000.00	$                 -	$ 1,40,000.00
		$ 2,65,000.00	$ 21,000.00	$ 19,000.00	$ 90,000.00	$ -10,000.00