Tammie Pike and Gail Smith agree to combine their businesses and form a. biltid

Question

Tammie Pike and Gail Smith agree to combine their businesses and form a. biltid by and the carrying amount of the assets contributed by each partner an partnership are shown below: the liabilities assumed by the Tammie Pike Gail Smith Fair value Carrying Fair value Carrying amount Cash at bank Accounts receivable Inventory Equipment Accumulated depreciation amount 6 200 12 800 22 000 72 000 S6200 12 800 21 500 48 000 5 800 11 400 18 500 5 000 (26 500 800 11 400 18 300 32 000 (18 600 equipment Accounts payable 13 400 13 400 12 800 12 800 Required Prepare separate journal entries to record the initial investment of each partner, assuming assets are recorded by the business to reflect their purchase price, and the arrangement is GST-free.

Explanation / Answer

Solution:

Preparing Separate Journal Entries to Record the Initial Investment of Each Partner:

Event General Journal Debit Credit a Cash at Bank $6,200 Accounts Receivable $12,800 Inventory $21,500 Equipment $48,000 Accounts Payable $13,400 Pike, Capital $75,100 (To Record Pike's Contribution to the Partnership) b Cash Bank $5,800 Accounts Receivable $11,400 Inventory $18,300 Equipment $32,000 Accounts Payable $12,800 Smith, Capital $54,700 (To Record Smith's Contribution to the Partnership)

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