On January 10, 2016, Jarius Walker and Rae King form a partnership. Walker agrees to invest $18,200 in cash and inventory valued at $48,800. King invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. 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 on original investments at 10%, salary allowances of $22,500 (Walker) and $30,400 (King), and the remainder equally.

Instructions

1. Journalize the entries to record the investments of Walker and King in the partner- ship accounts.

2. Prepare a balance sheet as at January 10, 2016, the date of formation of the partner- ship of Walker and King.

3. After adjustments and the closing of revenue and expense accounts at December 31, 2016, the end of the first full year of operations, the income summary account has a credit balance of $80,000, and the withdrawals accounts have debit balances of $22,500 (Walker) and $30,400 (King). Journalize the entries to close the income summary account and the withdrawals accounts at December 31, 2016.