Nancy Fabio has been operating an apartment-locator service as a sole proprietorship. She and Melissa Motts have decided to form a partnership. Fabio’s contribution consists of Cash, $4,000; Accounts Receivable, $13,000; Furniture, $15,000; Building (net), $54,000; and Notes Payable, $14,000.
To determine Fabio’s equity in the partnership, she and Motts hire an independent appraiser. The appraiser values all the assets and liabilities at their book value except the building, which has a current market value of $95,000. Also, there are additional Accounts Payable of $9,000 that Fabio will contribute. Motts will contribute cash equal to Fabio’s equity in the partnership.
1. Journalize the entry on the partnership books to record Fabio’s contribution.
2. Journalize the entry on the partnership books to record Motts’s contribution.