Question

Entries and Balance Sheet for Partnership

On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,700 cash and merchandise inventory valued at $50,500. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $125,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

1. Capri's Ledger Balance		Agreed-Upon Balance
   Accounts Receivable	$28,600		$23,200
   Allowance for Doubtful Accounts	1,300		1,600
   Merchandise Inventory	33,300		44,600
   Equipment	56,100		54,400
   Accumulated Depreciation-Equipment	18,700
   Accounts Payable	10,100		10,100
   Notes Payable (current)	6,200		6,200

   The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $56,100 (Lang) and $34,200 (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 $452,000 and expenses were $275,000, for a net income of $177,000. The drawing accounts have debit balances of $62,000 (Lang) and $53,000 (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