Problem 19.2A Accounting for the formation of a partnership. LO 19-3

Terrell Owens operates a small shop that sells fishing equipment. His post-closing trial balance on December 31, 2019, is shown below. Owens plans to enter into a partnership with Cathy Turner, effective January 1, 2020. Profits and losses will be shared equally. Owens is to transfer all assets and liabilities of his store to the partnership after revaluation as agreed. Turner will invest cash equal to Owenss investment after revaluation. The agreed values are Accounts Receivable (net), $13,200 Merchandise Inventory, $48,600 and Furniture and Equipment, $11,000. The partnership will operate as Owens and Turner Anglers Outpost.

1) In general journal form, prepare the entries to record:

a. The receipt of Owenss investment of assets and liabilities by the partnership.

b. The receipt of Turners investment of cash.

2) Prepare a balance sheet for Owens and Turner Anglers Outpost just after the investments.

Analyze: By what net amount were the net assets of Owens Tackle Center adjusted before they were transferred to the partnership?

Owens Tackle Center Postclosing Trial Balance December 31, 2019 Account Name Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Furniture and Equipment Accumulated Depreciation Accounts Payable Capital Totals Debit Credit 3,450 14,450 2,800 43,700 27,800 21,700 2,700 62,200 89,400 89,400