Question

total equity is owned by Jack Tyler Accounting for formation of a partnership. Terrell Owens operates a small shop that sells fishing equipment. His postclosing trial balance on December 31, 2019, is shown below Problem 19.2A Objective 19-3 GL Owens plans to enter into a partnership with Cathy Turner, effective January 1, 2020. Profits and losses will be shared equally. Owens is to transfer all assets and liabilities of his store to the partnership after revaluation as agreed. Turner will invest cash equal to Owens's investment after revaluation. The agreed values are Accounts Receivable (net), $29,000; Merchandise Inventory, $99,800; and Furniture and Equipment, $24,600. The partnership will operate as Owens and Turner Angler's Outpost. Owens Tackle Center Postclosing Trial Balance December 31, 2019 ACCOUNT NAME DEBIT CREDIT Cosh 9500 00 32 8 0 0 00 Accounts Receivable Allowance for Doubtful Accounts 5000 00 Merchandise Inventory Furniture and Equipment Accumulated Depreciation 90 00 0 00 58 200 00 46 00 0 00 8 000 00 131 5 00 00 190 5 00 00 Accounts Payable Capital Totals 190 500 00 INSTRUCTIONS 1. In general journal form, prepare the entries to record: a. The receipt of Owens's investment of assets and liabilities by the partnership. b. The receipt of Turner's investment of cash. Prepare a balance sheet for Owens and Turner Angler's Outpost just after the investments. 2. Analyze: By what net amount were the net assets of Owens Tackle Center adjusted before they were transferred to the partnership?

Answer 1

1. a	Journal Entries for receipt of Owen's investment of assets and liabilities by the partnership
	Accounts Receivable	Dr	$      29,000.00
	Merchandise Inventory	Dr	$      99,800.00
	Furniture and Equipment	Dr	$      24,600.00
	Cash	Dr	$        9,500.00
	To Accounts Payable	Cr		$                                8,000.00
	To Owen	Cr		$                            154,900.00
	(since Furniture and equipment are revalued hence the accumulated depreciation would not be taken over, further since accounts receivable are also agreed hence the allowance for doubtful debts will also not be considered to be taken over by the new partnership firm)
1. a	Journal Entries for receipt of Turner's investment of cash
	Cash	Dr	$    154,900.00
	To Turner	Cr		$                            154,900.00
	(Being Cash invested by Turner equal to Owen's investment)

2	Balance Sheet for Owens and Turner Angler's Outpost as at January 1, 2020
	Liabilities	Amount	Amount	Assets	Amount	Amount
	Capital Account			Fixed Assets
	Owen	$ 154,900.00		Furniture and Equipment		$    24,600.00
	Turner	$ 154,900.00
			$    309,800.00	Current Assets
				Accounts Receivable	$    29,000.00
	Liabilities			Merchandise Inventory	$    99,800.00
	Accounts Payable		$        8,000.00	Cash	$ 164,400.00
						$ 293,200.00
			$    317,800.00			$ 317,800.00