On March 1, 2005, Abbey and Adams formed a partnership. Abbey contributed $88,000 cash and Adams contributed land valued at $70,000 and a building valued at $100,000. The partnership also assumed responsibility for Adams’s $80,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Abbey is to receive an annual salary al¬ lowance of $30,000, both are to receive an annual interest allowance of 10% of their beginning-year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2005, Abbey withdrew $32,000 cash and Adams withdrew $25,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at December 31, 2005, the Income Summary account had a credit balance of $79,000.

1. Prepare journal entries to record

(a) the partners’ initial capital investments,

(b) their cash with¬ drawals, and

(c) the December 31 closing of both the Withdrawals and Income Summary accounts.

2. Determine the balances of the partners’ capital accounts as of December 31, 2005.