On January 1, 2015, Kevin Schmidt and David Cohen form a partnership. Schmidt agrees to invest $12,000 cash and inventory valued at $32,000. Cohen invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $80,000. Details regarding the carrying 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 of 10% on original investments, salary allowances of $36,000 (Schmidt) and $22,000 (Cohen), and the remainder equally.

Instructions

1. Journalize the entries to record the investments of Schmidt and Cohen in the part- nership accounts.

2. Prepare a balance sheet as at January 1, 2015, the date of formation of the partner- ship of Schmidt and Cohen.

3. After adjustments and the closing of revenue and expense accounts at December 31, 2015, the end of the first full year of operations, the income summary account has a credit balance of $84,000, and the withdrawals accounts have debit balances of $30,000 (Schmidt) and $25,000 (Cohen). Journalize the entries to close the income summary account and the withdrawals accounts at December 31, 2015.