exercises ex 170 michelle hamilton and bill rossi decide to form a partnership hamil 4325019

EXERCISES

Ex. 170

Michelle Hamilton and Bill Rossi decide to form a partnership. Hamilton invests $35,000 cash and accounts receivable of $30,000 less allowance for doubtful accounts of $2,000. Rossi contributes $25,000 cash and equipment having a $6,000 book value. It is agreed that the allowance account should be $3,000 and the fair value of the equipment is $10,000.

Instructions

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

Ex. 171

Ron Marden and Tip Baker operate separate auto repair shops. On January 1, 2017, they decide to combine their separate businesses which were operated as proprietorships to form M & B Auto Repair, a partnership. Information from their separate balance sheets is presented below:

Marden Auto RepairBaker Auto Repair

Cash$10,000$14,000

Accounts receivable12,00010,000

Allowance for doubtful accounts1,000500

Accounts payable5,0006,000

Notes payable—3,000

Salaries and wages payable1,0001,500

Equipment12,00024,000

Accumulated depreciation—equipment2,0004,000

It is agreed that the expected realizable value of Marden’s accounts receivable is $11,000 and Baker’s receivables is $7,000. The fair value of Marden’s equipment is $13,000 and the value of Baker’s equipment is $20,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Baker’s balance sheet which he will pay himself.

Instructions

Prepare the journal entries necessary to record the formation of the partnership.

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