Ron Marden and Tip Baker operate separate auto repair shops. On January 1, 2020, they decide to combine their separate businesses, which were operated as proprietorships, to form M & B Auto Repair, a partnership. Information from their separate balance sheets is presented below:
Marden Auto Repair
Cash: $11,000
Accounts receivable: $13,900
Allowance for doubtful accounts: $1,300
Accounts payable: $5,300
Notes payable: —
Salaries and wages payable: $1,300
Equipment: $12,900
Accumulated depreciation—equipment: $2,500
Baker Auto Repair
Cash: $15,600
Accounts receivable: $11,300
Allowance for doubtful accounts: $4,500
Accounts payable: $6,300
Notes payable: $3,500
Salaries and wages payable: $2,200
Equipment: $23,400
Accumulated depreciation—equipment: $4,900
It is agreed that the expected realizable value of Marden’s accounts receivable is $12,600 and Baker’s receivables is $6,800. The fair value of Marden’s equipment is $14,900 and the value of Baker’s equipment is $19,900. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Baker’s balance sheet, which he will pay himself.
Prepare the journal entries necessary to record the formation of the partnership.
