The post-closing trial balances of two proprietorships on January 1, 2008, are presented below.

Free and Will decide to form a partnership, Free-Will Company, with the following agreed upon valuations for noncash assets.

All cash will be transferred to the partnership, and the partnership will assume all the liabilities of the two proprietorships. Further, it is agreed that Free will invest an additional \($3,000\) in cash, and Will will invest an additional \($13,000\) 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 each partner.

(c) Prepare a balance sheet for the partnership on January 1, 2008.

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Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory Equipment Accumulated depreciation-equipment Notes payable Accounts payable Free, Capital Will, Capital Free Company Will Company Dr. Cr. Dr. Cr. $ 9,500 $ 6,000 15,000 23,000 $ 2,500 $ 4,000 28,000 17,000 50,000 30,000 24,000 13,000 25,000 20,000 37,000 31,000 22,000 $102,500 $102,500 $76,000 $76,000