Example 1

A, B, and C are partners in ABC partnership, their contribution were as follows:

A made a cash investment $50,000
B made a cash investment $42,000 and inventory having book value of $30,000 and market value of
$58,000
C transferred assets and liabilities of his own previous sole business into the partnership

Assets Book value Market value

Cash 8,400
Inventory 26,000 20,800
A/R 117,600
Equipment 25,000 19,500
A/P 7,800

1. Journalize each partner separately.

2. Journalize in a combined entry /single entry.

Example 2

Patrick and Samuel decide to form a partnership, PASA Co., with the following assets and liabilities:

Patrick Company Samuel Company

Book Value Fair Value Book Value Fair Value
Cash $14,000 $12,000
Account Receivable 17,500 26,000
Allowance for doubtful 3,000 $4,500 4,400 $4,000
accounts
Merchandise inventory 26,500 28,000 18,400 20,000
Equipment 45,000 23,000 29,000 16,000
Accumulated depreciation 24,000 11,000
equipment
Notes payable 18,000 15,000
Accounts payable 22,000 31,000

All cash will be transferred to the partnership and the partnership will assume all the liabilities of the
two proprietorship. Further, it is agreed that Patrick will invest an additional $5,000 in cash and
Samuelson will invest an additional $19,000 in cash.

Instructions:
a. prepare separate journal entries to record the transfer of each proprietorship’s assets and liabilities to
the partnership
b. Journalize the additional cash investment by the cash partner
c. Prepare a classified balance sheet for the partnership

Example 3 Past Midterm Exam Question