Jill and Sue Decide to Form the JS Partnership Net Accounts

question 143

Essay

Jill and Sue decide to form the JS Partnership.On February 1,2014,they combine their assets except for the land with the following current market values and book values:
$\begin{array}{c}&&&&&&\text {Jill's assets}&&&\text {Sue's assets}\\\end{array}\\\begin{array}{llll}&\text { Book } & \text { Market } & \text { Book } & \text { Market } \\&\text { value } & \text { value } & \text { value } & \text { value }\\\text { Cash }&\$40,000&\$40,000&\$50,000&\$50,000\end{array}$ Net accounts
$\begin{array}{lllll}\text { receivable } & 39,500 & 37,000 & 28,000 & 27,000 \\\text { Inventory } & 69,000 & 75,000 & 55,000 & 72,000 \\\text { Land } & 50,000 & 85,000 & 75,000 & 90,000 \\\text { Equipment } & 80,000 & 70,000 & 90,000 & 75,000\end{array}$ Accumulated
$$\begin{array} { l l l l l } \text { amortization } & 25,000 & - - - & 30,000 & - - - \\\text { Accounts payable } & 28,000 & 28,000 & - - - & - - -\\\text { Notes payable } & - - - - & - - - & 10,000 & 10,000\end{array}$$ Journalize the entries on February 1,2014,to record the partners' initial investments.

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Definitions:

Liquidity

A firm’s cash and marketable securities position, refers to its ability to meet maturing obligations. A liquid asset is any asset that can be quickly sold and converted to cash at its “fair” value. Active markets provide liquidity.

Inventory Turnover Ratio

Sales divided by inventories.

Liquidity Position

A measure of a company or individual's ability to quickly convert assets into cash to meet financial obligations.

Efficiently

The ability to achieve a goal or perform a task with the least waste of time and effort; effectiveness and efficiency combined.