Mo Mulder and Molly Munchkin operate separate hobby shops. On April 8, 2021, they decide to combine
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Mo Mulder and Molly Munchkin operate separate hobby shops. On April 8, 2021, they decide to combine their businesses, which had been operated as proprietorships, to form Mo & Molly Partnership. Information from their separate balance sheets is presented below:
Mo's Models | Molly's Crafts | |||
Cash | $10,000 | $4,000 | ||
Accounts receivable | 2,000 | 1,150 | ||
Allowance for doubtful accounts | 250 | 100 | ||
Accounts payable | 1,250 | 500 | ||
Equipment | 2,300 | 900 | ||
Accumulated depreciation - equipment | 900 | 500 |
It is agreed that the expected realizable value of Mo’s accounts receivable is $1,350 and Molly's receivables is $950. The fair market value of Mo’s equipment is $1,100 and Molly's equipment is $600. It is further agreed that the new partnership will assume all liabilities of the proprietorships.
Prepare the journal entries necessary to record the formation of the partnership.
Date | Account Titles and Explanation | Debit | Credit |
Apr. 8, 2021 | Accounts ReceivableCashAccounts PayableM. Munchkin, CapitalAllowance for Doubtful AccountsM. Mulder, CapitalEquipment | ||
Accounts PayableAccounts ReceivableM. Mulder, CapitalM. Munchkin, CapitalAllowance for Doubtful AccountsEquipmentCash | |||
CashM. Munchkin, CapitalAccounts ReceivableAccounts PayableAllowance for Doubtful AccountsM. Mulder, CapitalEquipment | |||
CashM. Munchkin, CapitalAllowance for Doubtful AccountsAccounts PayableEquipmentM. Mulder, CapitalAccounts Receivable | |||
CashAllowance for Doubtful AccountsM. Mulder, CapitalAccounts PayableEquipmentAccounts ReceivableM. Munchkin, Capital | |||
M. Munchkin, CapitalAccounts ReceivableM. Mulder, CapitalCashEquipmentAccounts PayableAllowance for Doubtful Accounts | |||
(To record Mo's Models) | |||
Apr. 8, 2021 | Accounts PayableAccounts ReceivableEquipmentAllowance for Doubtful AccountsM. Munchkin, CapitalCashM. Mulder, Capital | ||
Accounts PayableM. Mulder, CapitalM. Munchkin, CapitalAccounts ReceivableEquipmentAllowance for Doubtful AccountsCash | |||
M. Mulder, CapitalAccounts PayableM. Munchkin, CapitalCashAccounts ReceivableAllowance for Doubtful AccountsEquipment | |||
Allowance for Doubtful AccountsM. Mulder, CapitalEquipmentAccounts PayableM. Munchkin, CapitalAccounts ReceivableCash | |||
M. Mulder, CapitalAccounts PayableEquipmentAccounts ReceivableM. Munchkin, CapitalCashAllowance for Doubtful Accounts | |||
M. Mulder, CapitalAllowance for Doubtful AccountsEquipmentAccounts ReceivableAccounts PayableCashM. Munchkin, Capital | |||
(To record Molly's Crafts) |
Determine the partnership’s balances in each account immediately after forming the partnership.
Balances | ||||
Cash | $ | Debit balanceCredit balance | ||
Accounts receivable | $ | Debit balanceCredit balance | ||
Allowance for doubtful accounts | $ | Credit balanceDebit balance | ||
Equipment | $ | Credit balanceDebit balance | ||
Accounts payable | $ | Credit balanceDebit balance | ||
M. Mulder, Capital | $ | Credit balanceDebit balance | ||
M. Munchkin, Capital | $ | Debit balanceCredit balance |
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