Reference no: EM132487712

Prepare the journal entries to record the formation of the partnerships.

Wendy Reichstein and Sonia Datta operate separate auto repair shops. On January 15, 2021, they decided to combine their businesses, which had been operated as proprietorships, to form Wendy Sonia Auto Repair, a partnership. Information from their separate balance sheets is presented below:

                                   Wendy Sonia                         Auto Repair

Cash                          $7,500                             $1,500

Accounts receivable     6,300                             31,000

Allowance for doubtful accounts 800 1,500

Accounts payable              2,600                         8,200

Notes payable                     -                       15,000

Salaries payable                     -                     1,100

Equipment                        8,700                   28,000

Accumulated depreciation - equipment 2,200 16,000 It is agreed that the expected realizable value of Wendy's accounts receivable is $5,100 and Sonia's receivables is $28,800. The fair market value of Wendy's equipment is $6,000 and Sonia's equipment is $9,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the note payable on Sonia's balance sheet, which she will pay herself.

Question 1: Prepare the journal entries necessary to record the formation of the partnership. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)