Question 1: Mr A and Mr B operate separate auto repair shops. On January 1, 2005, they decide to combine their separate businesses which were operated as proprietorships to form A & B Auto Repair, a partnership. Information from their separate balance sheets is presented below: Cash $10,000 $12,000 Accounts receivable 9,000 7,000 Allowance for doubtful accounts 1,000 500 Accounts payable 5,000 6,000 Notes payable - Salaries payable 1,000 1,500 Equipment 12,000 24,000 Accumulated amortization-Equipment 2,000 4,000 3,000 It is agreed that the expected realizable value of A accounts receivable is $8,000 and B receivables is $5,000. The fair market value of A equipment is $15,000 and the value of B's equipment is $20,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on B's balance sheet which he will pay himself Instructions: Prepare the journal entries necessary to record the formation of the partnership Solution