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Entries and Balance Sheet for Partnership

On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,200 cash and merchandise inventory valued at $49,100. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $122,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

	Capri's Ledger Balance		Agreed-Upon Balance
Accounts Receivable	$27,800		$22,500
Allowance for Doubtful Accounts	1,200		1,500
Merchandise Inventory	32,400		43,400
Equipment	54,600		53,000
Accumulated Depreciation-Equipment	18,200
Accounts Payable	9,800		9,800
Notes Payable (current)	6,000		6,000

The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $54,600 (Lang) and $33,300 (Capri), and the remainder equally.

Required:

1. Journalize the entries to record the investments of (1) Lang and (2) Capri in the partnership accounts. For a compound transaction, if an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Apr. 1
Apr. 1

2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.

Lang and Capri Balance Sheet April 1, 20Y1
Assets
Current assets:
Total current assets			$
Property, plant, and equipment:
Total assets			$
Liabilities
Current liabilities:
		$
Total liabilities			$
Partners' Equity
		$
Total partners' equity
Total liabilities and partners' equity			$

3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $471,000 and expenses were $314,000, for a net income of $157,000. The drawing accounts have debit balances of $55,000 (Lang) and $47,000 (Capri). Journalize the entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2. For a compound transaction, if an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Mar. 31
Mar. 31

Answer 1