Question

Joumalizing partner's original investmentHolly Renfro contributed a patent, accounts receivable, and $20,000 cash to a partnership. The patent had a book value of$8,000. However, the technology covered by the patent appeared to have significant market potentiaL Thus, the patentwas appraised at $92,000. The accounts receivable control account was $45,000, with an allowance for doubtful accountsof $3,000. The partnership also assumed a $14,000 account payable owed to a Renfro supplier.Provide the journal entry for Renfro’s contribution to the partnership.

Answer 1

Answer:

Dr Cash                                                  20,000

Dr Account Receivable                         45,000

Dr Patent                                                92,000

Cr Allowance for doubtful debt           3,000

Cr Account payable                              14,000

Cr  Holly Renfro, Capital                       140,000  

( to record Renfro’s contribution to the partnership)

Explanation:

The Holly Renfro's contribution of Capital to the partnership is decided as:

Cash + Net value of Account Receivables + Market value of patent - Account payable = 20,000 + 42,000 + 92,000 - 14,000 = $140,000

which is recorded in the partnership as:

Dr Cash 20,000 to show the increase in Cash account of

Dr Account Receivable 45,000; Cr Allowance for doubtful debt 3,000. To record net value of Account receivable of 42,000.

Dr Patent 92,000. Patent is recorded at market value to show the accurate amount of contribution to the partnership.

Cr Account payable 14,000 to show amount of liabilities the partnership assumed from Holly Renfro.

Cr  Holly Renfro, Capital 140,000 to show net capital contribution of Holly Renfro to the partnership.