The partnership of Jordan and O'Neal began business on January 1, 20X7. The following assets were contributed by each partner (the noncash assets are stated at their fair values on January 1, 20X7):

The land was subject to a \(\$ 50,000\) mortgage, which the partnership assumed on January 1, 20X7. The equipment was subject to an installment note payable that had an unpaid principal amount of \(\$ 20,000\) on January 1, 20X7. The partnership also assumed this note payable. Jordan and O'Neal agreed to share partnership income and losses in the following manner:

During 20X7, the following events occurred:
1. Inventory was acquired at a cost of \(\$ 30,000\). At December \(31,20 \times 7\), the partnership owed \(\$ 6,000\) to its suppliers.
2. Principal of \(\$ 5,000\) was paid on the mortgage. Interest expense incurred on the mortgage was \(\$ 2,000\), all of which was paid by December \(31,20 \times 7\).
3. Principal of \(\$ 3,500\) was paid on the installment note. Interest expense incurred on the installment note was \(\$ 2.000\), all of which was paid by December 31, 20X7.
4. Sales on account amounted to \(\$ 155,000\). At December \(31,20 \times 7\), customers owed the partnership \(\$ 21.000\).
5. Selling and general expenses, excluding depreciation, amounted to \(\$ 34,000\). At December 31 , 20X7, the partnership owned \(\$ 6,200\) of accrued expenses. Depreciation expense was \(\$ 6,000\).
6. Each partner withdrew \(\$ 200\) each week in anticipation of partnership profits.
7. The partnership's inventory at December \(31,20 \times 7\), was \(\$ 20,000\).
8. The partners allocated the net income for \(20 \times 7\) and closed the accounts.
\section*{Additional Information}
On January 1, 20X8, the partnership decided to admit Hill to the partnership. On that date, Hill invested \(\$ 99.800\) of cash into the partnership for a 20 percent capital interest. Total partnership capital after Hill was admitted totaled \(\$ 450,000\).
\section*{Required}

a. Prepare journal entries to record the formation of the partnership on January 1, 20X7, and to record the events which occurred during 20X7.

b. Prepare the income statement for the Jordan-O'Neal Partnership for the year ended December \(31,20 \times 7\).

c. Prepare a balance sheet for the Jordon-O'Neal Partnership at December 31, \(20 \times 7\).

d. Prepare the journal entry for the admission of Hill on January 1, 20X8.

Transcribed Image Text:

Jordan O'Neal Cash Inventories $ 60.000 80.000 $ 50,000 -0- Land -0- 130,000 Equipment 100.000 -0-