Entries and Balance Sheet for Partnership
On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership.
Lang agrees to invest $14,600 cash and merchandise inventory valued
at $39,400. Capri invests certain business assets at valuations
agreed upon, transfers business liabilities, and contributes
sufficient cash to bring his total capital to $98,000. 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 | $22,300 | $18,100 | ||
Allowance for Doubtful Accounts | 1,000 | 1,300 | ||
Merchandise Inventory | 26,000 | 34,800 | ||
Equipment | 43,800 | 42,500 | ||
Accumulated Depreciation—Equipment | 14,600 | |||
Accounts Payable | 7,900 | 7,900 | ||
Notes Payable (current) | 4,800 | 4,800 |
The partnership agreement includes the following provisions regarding the division of net income: interest of 12% on original investments, salary allowances of $43,800 (Lang) and $26,700 (Capri), and the remainder equally.
Required:
1. Journalize the entries to record the investments of Lang and Capri in the partnership accounts. 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 $457,000 and expenses were $317,000, for a net income of $140,000. The drawing accounts have debit balances of $49,000 (Lang) and $42,000 (Capri). Journalize the entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2. If an amount box does not require an entry, leave it blank.
ACCOUNT | DEBIT | CREDIT | |
---|---|---|---|
Mar. 31 | |||
Mar. 31 | |||
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