Nate is investing in a partnership with Deidre. Nate contributes as part of his initial investment Accounts Receivable of $60000; an Allowance for Doubtful Accounts of $9000; and $6000 cash. The entry that the partnership makes to record Nate's initial contribution includes a
A) credit to Nate Capital for $66000.
B) debit to Accounts Receivable for $51000.
C) credit to Nate Capital for $57000.
D) debit to Allowance for Doubtful Accounts for $9000.

Question

Quizplus · Accepted Answer

To record Nate's initial contribution, the partnership would make the following entry:

Debit: Accounts Receivable $60,000
Credit: Allowance for Doubtful Accounts $9,000
Credit: Nate Capital $57,000
Credit: Cash $6,000

This is because the Accounts Receivable and Allowance for Doubtful Accounts accounts are transferred from Nate's individual accounts to the partnership's accounts. The amount credited to Nate Capital is equal to the net value of the Accounts Receivable after the allowance is subtracted. Finally, the cash contribution is also credited to Nate Capital. Option C correctly reflects this entry.

Nate Is Investing in a Partnership with Deidre