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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Journalizing partner’s original investment

Austin fisher contributed land, inventory, and $36,000 cash to a partnership. The land had a book value of $ 120,000 and a market value of $175,000. The inventory had a book value of $50,000 and a market value of $42,000. The partnership also assumed a $35,000 note payable owed by Fisher that was used originally to purchase the land.

Provide the journal entry for Fisher's contribution to the partnership.

To determine

Partnership

It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

Forming a Partnership

While forming the partnership, the contribution of assets by partners are debited to the partnership assets account; whereas the liabilities of the partnerships are credited to the partnership’s liabilities account, and the net amount of the investments of partners are credited to the partners’ individual capital account.

To record:  The journal entry for F’s contribution to the partnership.

Explanation

In partnership, the non-cash assets are recorded at agreed value by the partners. The book value of land was 120,000; but the market value of land was appraised to 175,000. Moreover cash, inventory and land are assets of partnership and have increased it. So, these items are debited...

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