Edmond Veal operates a store that sells paintings and portraits by local artists. Veal has agreed to enter into a partnership with Sarah Cobb, effective January 1, 2019. The new firm will be called Artist€™s Supply Company. Veal is to transfer the assets and liabilities of his business to the partnership at the values agreed on. Cobb will invest cash that is equal to Veal€™s investment after revaluation. The accounts shown on Veal€™s books and the agreed-on value of assets and liabilities follow:

INSTRUCTIONS
1. Prepare the general journal entries to record the following transactions on the books of the partnership on January 1, 2019:
a. Receipt of Veal€™s investment of assets and liabilities.
b. Receipt of Cobb€™s investment of cash.
2. Prepare a balance sheet for the partnership as of the beginning of its operations on January 1, 2019.
Analyze: If Sarah Cobb agreed to a cash investment equal to 80 percent of the value of Edmond Veal€™s investment, what would the balance of Sarah Cobb€™s capital account be after the formation of the partnership?

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Balances Value Shown In Agreed to by Partners Veal's Records Assets Transferred $ 36,000 $ 36,000 Cash $ 36,000 Accounts Receivable 32,000 Allowance for Doubtful Accounts 4,000 27,200 Merchandise Inventory 344,000 384,000 216,000 Furniture and Equipment 95,200 Accumulated Depreciation 164,000 52,000 $504,000 $502,400 Total Assets Liabilities and Owner's Equity Transferred Accounts Payable Edmond Veal, Capital 32,000 $470,400 $504,000