Arnold Black and Sam Smith operate separate auto repair shops as proprietorships. On January 1, 2021, they decide to combine their separate businesses to form Black Smith Auto Repair, a partnership. Information from their separate balance sheets is presented below: It is agreed that the expected realizable value of Black's accounts receivable is $ 5,000 and Smith's receivables is $ 4,000. The fair value of Black's equipment is $ 15,000 and Smith's equipment is $ 24,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Smith's balance sheet that he will pay himself.
Instructions
Prepare the journal entries necessary to record the formation of the partnership.

Question

Arnold Black and Sam Smith operate separate auto repair shops as proprietorships. On January 1, 2021, they decide to combine their separate businesses to form Black Smith Auto Repair, a partnership. Information from their separate balance sheets is presented below:  It is agreed that the expected realizable value of Black's accounts receivable is $ 5,000 and Smith's receivables is $ 4,000. The fair value of Black's equipment is $ 15,000 and Smith's equipment is $ 24,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Smith's balance sheet that he will pay himself.
Instructions
Prepare the journal entries necessary to record the formation of the partnership.

Quizplus · Accepted Answer

The Answer of Arnold Black and Sam Smith operate separate auto repair shops as proprietorships. On January 1, 2021, they decide to combine their separate businesses to form Black Smith Auto Repair, a partnership. Information from their separate balance sheets is presented below:  It is agreed that the expected realizable value of Black's accounts receivable is $ 5,000 and Smith's receivables is $ 4,000. The fair value of Black's equipment is $ 15,000 and Smith's equipment is $ 24,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Smith's balance sheet that he will pay himself.
Instructions
Prepare the journal entries necessary to record the formation of the partnership.

Arnold Black and Sam Smith Operate Separate Auto Repair Shops