On May 1, 2007, Crystal Polles and Doug Kovac form a partnership. Polles agrees to invest $16,500 in cash and merchandise inventory valued at $43,500. Kovac invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $50,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $20,000 and $25,000, respectively, and the remainder equally.

Instructions
1. Journalize the entries to record the investments of Polles and Kovac in the partnership accounts.
2. Prepare a balance sheet as of May 1, 2007, the date of formation of the partnership of Polles and Kovac.
3. After adjustments and the closing of revenue and expense accounts at April 30, 2008, the end of the first full year of operations, the income summary account has a credit balance of $74,000, and the drawing accounts have debit balances of $22,000 (Polles) and $28,000 (Kovac). Journalize the entries to close the income summary account and the drawing accounts at April30.

Kovor's Ledger Agreed-Upon Balance Valuation S19,100 1,400 Accounts Receivable Allowance for Doubtful Accounts Equipment Accumulated Depreciation-Equipment Accounts Payable Notes Payable $22,600 ,100 86,400 29,300 14,000 20,000 14,000 20,000