Austin Fisher contributed land, inventory, and $20,000 cash to a partnership. The land had a book value of $72,000 and a market value of $131,000. The inventory had a book value of $75,600 and a market value of $69,600. The partnership also assumed a $52,000 note payable owed by Fisher that was used originally to purchase the land. Required:
Provide the journal entry for Fisher's contribution to the partnership.

Austin Fisher

General Journal for Fisher's contribution to the partnership:

Debit Land $131,000

Debit Inventory $69,600

Debit Cash Account $20,000

Credit Note Payable $52,000

Credit Fisher's Capital $168,600

To record the assets contributed by Fisher and assumed note payable.

Explanation:

a) Fair values are used to determine the value of the assets contributed by Fisher to the partnership and they form the basis for his partnership interest.  These assets are then reduced by the fair value of the liability from Fisher, which the partnership assumed from him as a result of his partnership interest.

b) The journal entries have debit and credit entries.  The debit entries record the assets to the partnership at their fair values, while the credit entries record the liabilities arising from Fisher joining the partnership.  The partnership assumed Fisher's liability on notes payable and owe Fisher the net of his contributed capital.

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