Questionken lott and jim rosen operate separate auto repair, Ask an Expert

Accounting

Question:

Ken Lott and Jim Rosen operate separate auto repair shops. On January 1, 2005, they decide to combine their separate businesses which were operated as proprietorships to form L & R Auto Repair, a partnership. Information from their separate balance sheets is presented below:

Lott Auto Repair Rosen
Cash $10,000 $12,000
Accounts receivable 9,000 7,000
Allowance for doubtful accounts (1,000) (500)
Accounts payable 5,000 6,000
Salaries payable 1,000 1,500
Equipment 12,000 24,000
Accumulated amortization-Equipment (2,000) (4,000)

It is agreed that the expected realizable value of Lott''s accounts receivable is $8,000 and Rosen''s receivables is $5,000. The fair market value of Lott''s equipment is $15,000 and the value of Rosen''s equipment is $20,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships.

Instructions

Prepare the journal entries necessary to record the formation of the partnership.

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Financial Accounting, Accounting

Category:- Financial Accounting
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