12-1

Entries and Balance Sheet for Partnership

On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $19,000 cash and merchandise inventory valued at $51,300. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $127,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

	Capri's Ledger Balance		Agreed-Upon Balance
Accounts Receivable	$29,100		$23,600
Allowance for Doubtful Accounts	1,300		1,600
Merchandise Inventory	33,800		45,300
Equipment	57,000		55,300
Accumulated Depreciation-Equipment	19,000
Accounts Payable	10,300		10,300
Notes Payable (current)	6,300		6,300

The partnership agreement includes the following provisions regarding the division of net income: interest of 8% on original investments, salary allowances of $57,000 (Lang) and $34,800 (Capri), and the remainder equally.

Required:

1. Journalize the entries to record the investments of (1) Lang and (2) Capri in the partnership accounts. For a compound transaction, if an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Apr. 1	Accounts ReceivableCashEli Capri, CapitalWhitney Lang, CapitalNotes PayableCash	fill in the blank 2	fill in the blank 3
	Accounts ReceivableEli Capri, CapitalWhitney Lang, CapitalMerchandise InventoryNotes PayableMerchandise Inventory	fill in the blank 5	fill in the blank 6
	Accounts PayableCashEli Capri, CapitalWhitney Lang, CapitalMerchandise InventoryWhitney Lang, Capital	fill in the blank 8	fill in the blank 9
Apr. 1	Accounts PayableAllowance for Doubtful AccountsCashWhitney Lang, CapitalNotes PayableCash	fill in the blank 11	fill in the blank 12
	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsWhitney Lang, CapitalNotes PayableAccounts Receivable	fill in the blank 14	fill in the blank 15
	Accounts PayableAllowance for Doubtful AccountsWhitney Lang, CapitalMerchandise InventoryNotes PayableMerchandise Inventory	fill in the blank 17	fill in the blank 18
	Accounts PayableAllowance for Doubtful AccountsEquipmentWhitney Lang, CapitalNotes PayableEquipment	fill in the blank 20	fill in the blank 21
	Accounts ReceivableAllowance for Doubtful AccountsCashEquipmentWhitney Lang, CapitalAllowance for Doubtful Accounts	fill in the blank 23	fill in the blank 24
	CashAccounts PayableAccounts ReceivableEquipmentWhitney Lang, CapitalAccounts Payable	fill in the blank 26	fill in the blank 27
	Accounts ReceivableCashEquipmentWhitney Lang, CapitalNotes PayableNotes Payable	fill in the blank 29	fill in the blank 30
	Accounts ReceivableCashEli Capri, CapitalEquipmentWhitney Lang, CapitalEli Capri, Capital	fill in the blank 32	fill in the blank 33

2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.

Lang and Capri Balance Sheet April 1, 20Y1
Assets
Current assets:
Accounts PayableCashEli Capri, CapitalEquipmentNotes PayableCash		fill in the blank 35
Accounts PayableAccounts ReceivableEquipmentNotes PayableWhitney Lang, CapitalAccounts Receivable	fill in the blank 37
Less Accounts PayableLess Accounts ReceivableLess Allowance for Doubtful AccountsLess CashLess Whitney Lang, CapitalLess Allowance for Doubtful Accounts	fill in the blank 39	fill in the blank 40
Accounts PayableEquipmentMerchandise InventoryNotes PayableWhitney Lang, CapitalMerchandise Inventory		fill in the blank 42
Total current assets			$ fill in the blank 43
Property, plant, and equipment:
Accounts ReceivableAllowance for Doubtful AccountsCashEquipmentMerchandise InventoryEquipment			fill in the blank 45
Total assets			$ fill in the blank 46
Liabilities
Current liabilities:
Accounts PayableAccounts ReceivableCashEli Capri, CapitalEquipmentAccounts Payable		$ fill in the blank 48
Accounts ReceivableCashEquipmentMerchandise InventoryNotes PayableNotes Payable		fill in the blank 50
Total liabilities			$ fill in the blank 51
Partners' Equity
Accounts ReceivableCashEquipmentMerchandise InventoryWhitney Lang, CapitalWhitney Lang, Capital		$ fill in the blank 53
Accounts ReceivableCashEli Capri, CapitalEquipmentMerchandise InventoryEquipment		fill in the blank 55
Total partners' equity			fill in the blank 56
Total liabilities and partners' equity			$ fill in the blank 57

3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $477,000 and expenses were $319,000, for a net income of $158,000. The drawing accounts have debit balances of $55,000 (Lang) and $47,000 (Capri). Journalize the entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2. For a compound transaction, if an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Mar. 31	Eli Capri, CapitalEli Capri, DrawingRevenuesWhitney Lang, CapitalWhitney Lang, DrawingRevenues	fill in the blank 59	fill in the blank 60
	CashEli Capri, DrawingExpensesRevenuesWhitney Lang, Capital	fill in the blank 62	fill in the blank 63
	Accounts ReceivableCashEli Capri, DrawingRevenuesWhitney Lang, Capital	fill in the blank 65	fill in the blank 66
	Accounts PayableCashEli Capri, CapitalRevenuesWhitney Lang, Drawing	fill in the blank 68	fill in the blank 69
Mar. 31	CashEli Capri, DrawingRevenuesWhitney Lang, CapitalWhitney Lang, DrawingWhitney Lang, Capital	fill in the blank 71	fill in the blank 72
	CashEli Capri, CapitalEli Capri, DrawingRevenuesWhitney Lang, DrawingEli Capri, Capital	fill in the blank 74	fill in the blank 75
	CashEli Capri, CapitalRevenuesWhitney Lang, CapitalWhitney Lang, DrawingWhitney Lang, Drawing	fill in the blank 77	fill in the blank 78
	CashEli Capri, CapitalEli Capri, DrawingRevenuesWhitney Lang, CapitalEli Capri, Drawing	fill in the blank 80	fill in the blank 81

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Feedback

1. Record assets and liabilities at their current values and record the appropriate allowance accounts if necessary for partner contributions, along with offsetting entries to the appropriate capital accounts.

2. The balance sheet for a partnership is a formal presentation of the accounting equation and includes the capital account balance for each partner in the equity section. These balances should equal the credits to the capital accounts in part 1.

3. Set up a column for each member and a total column. Allocate salary allowances and interest allowances. Allocate remaining income. Close Revenue and expenses to the capital accounts. Close the