The trial balances of two proprietorships on January 1, 2021, follow:

Domic and Dasilva decide to form a partnership on January 1 and agree on the following valuations for the noncash assets that they are each contributing:

All of the assets in each of the proprietorships will be transferred to the partnership. The partnership will also assume all the liabilities of the two proprietorships. Domic and Dasilva are also agreed that Dasilva will invest the amount of cash required so their investments in the partnership are equal.

Instructions

a. What are the advantages and disadvantages for these two individuals of forming a partnership as opposed to setting up a corporation?

b. Prepare separate journal entries to record the transfer of each proprietorship?s assets and liabilities to the partnership on January 1.

c. Journalize the additional cash investment.

Taking It Further

What are some of the advantages of two individuals such as Domic and Dasilva operating as a partnership instead of as two separate proprietorships?

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Domic Company Dasilva Company Dr. $ 9,000 Cr. Dr. Cr. Cash $10,000 24,000 Accounts receivable 13,500 $ 3,000 $ 5,500 Allowance for doubtful accounts Merchandise inventory 11,500 15,500 Equipment Accumulated depreciation-equipment Accounts payable I. Domic, capital P. Dasilva, capital 40,000 31,000 24,000 13,000 11,000 36,000 34,000 28,000 $74,000 $74,000 $80,500 $80,500 Domic Dasilva Accounts receivable-net realizable value Merchandise inventory $ 9,000 $21,000 13,000 14,000 Equipment 15,000