question archive Ted Karl has owned and operated a proprietorship for several years
Ted Karl has owned and operated a proprietorship for several years
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Ted Karl has owned and operated a proprietorship for several years. On January 1, 2017, he decides to end this business and become a partner in the firm of Kurl and Karl. Karl's investment in the partnership consists of $24,000 cash and the following assets from his proprietorship: accounts receivable of $28,000 less an allowance for doubtful account of $4,000, and equipment of $40,000 less accumulated depreciation of $8,000. The partners agree that the accounts receivable's net realizable value should be $22,000 for the partnership.
This means that the allowance for doubtful account needs to be adjusted to reflect the new agreed upon net realizable value. In addition, the partners also agree that the equipment's fair market value is $35,000. The partnership will also assume responsibility for Karl's accounts payable of $12,000. Journalize Karl's admission to Kurl and Karl on January 1. Date Account Titles and Explanation P
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Answer:
Admission of Karl in partnership firm Kurl and Karl will take place at Market Value / Realizable Value of Assets and Liabilities of Karl.
Journal entry
January 1, 2017
Cash A/c Dr $ 24,000
Accounts Receivable A/c Dr $ 22,000
Equipment A/c Dr $ 35,000
To Accounts Payable A/c $ 12,000
To Capital Contribution A/c $ 69,000
