Question

Yissachar and Zevulun decided to form a partnership. Yissachar, a former sole proprietorship had the following accounts: Cash $50,000;
Accounts Receivable $80,000; Allowance for Doubtful Accounts $3,000; Equipment $60,000; Accumulated depreciation – Equipment
$20,000. The partnership agreed that the Allowance for Doubtful Accounts should be valued at $4,000, and the equipment had a fair
market value of $45,000. Zevulun, invested $75,000 cash and a truck that cost him $9,000 when he bought it ten years ago but has a fair
market value of $5,000. Prepare the journal entries necessary to record the formation of the partnership.

Answer 1

Contributions of founders to the authorized capital:

By Yissachar:

1.Debit Cash Credit settlements with retainers :$50,000

2.Debit Accounts Receivable Credit settlements with retainers: $80,000.

3.Debit Accumulated depreciation – Equipment Credit Equipment: $20,000

4.Debit Allowance for Doubtful Accounts Credit Accounts Receivable: $4,000

5.Debit equipment Credit settlements with retainers: $45,000.

By Zevulun:

1. Debit Cash Credit settlements with retainers :$75,000
2. Debit truck Credit settlements with retainers :$5,000

Formed authorized capital:

Debit settlements with retainers Credit authorized capital: $255,000