A.

Entries and Balance Sheet for Partnership

On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $14,400 cash and merchandise inventory valued at $38,900. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $96,000. 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	$22,000		$17,800
Allowance for Doubtful Accounts	1,000		1,300
Merchandise Inventory	25,600		34,300
Equipment	43,200		41,900
Accumulated DepreciationEquipment	14,400
Accounts Payable	7,800		7,800
Notes Payable (current)	4,800		4,800

The partnership agreement includes the following provisions regarding the division of net income: interest of 8% on original investments, salary allowances of $43,200 (Lang) and $26,400 (Capri), and the remainder equally.

Required:

1. Journalize the entries to record the investments of Lang and Capri in the partnership accounts. If an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Apr. 1		fill in the blank 2	fill in the blank 3
		fill in the blank 5	fill in the blank 6
		fill in the blank 8	fill in the blank 9
Apr. 1		fill in the blank 11	fill in the blank 12
		fill in the blank 14	fill in the blank 15
		fill in the blank 17	fill in the blank 18
		fill in the blank 20	fill in the blank 21
		fill in the blank 23	fill in the blank 24
		fill in the blank 26	fill in the blank 27
		fill in the blank 29	fill in the blank 30
		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:
		fill in the blank 35
	fill in the blank 37
	fill in the blank 39	fill in the blank 40
		fill in the blank 42
Total current assets			$ fill in the blank 43
Property, plant, and equipment:
			fill in the blank 45
Total assets			$ fill in the blank 46
Liabilities
Current liabilities:
		$ fill in the blank 48
		fill in the blank 50
Total liabilities			$ fill in the blank 51
Partners' Equity
		$ fill in the blank 53
		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 $461,000 and expenses were $327,000, for a net income of $134,000. The drawing accounts have debit balances of $47,000 (Lang) and $40,000 (Capri). Journalize the entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2. If an amount box does not require an entry, leave it blank.

	ACCOUNT	DEBIT	CREDIT
Mar. 31		fill in the blank 59	fill in the blank 60
		fill in the blank 62	fill in the blank 63
		fill in the blank 65	fill in the blank 66
		fill in the blank 68	fill in the blank 69
Mar. 31		fill in the blank 71	fill in the blank 72
		fill in the blank 74	fill in the blank 75
		fill in the blank 77	fill in the blank 78
		fill in the blank 80	fill in the blank 81

B.

Statement of Partnership Liquidation

After the accounts are closed on April 10, prior to liquidating the partnership, the capital accounts of Zach Fairchild, Austin Lowes, and Amber Howard are $39,200, $7,200, and $30,300, respectively. Cash and noncash assets total $10,000 and $76,700, respectively. Amounts owed to creditors total $10,000. The partners share income and losses in the ratio of 1:1:2. Between April 10 and April 30, the noncash assets are sold for $40,700, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.

Required:

1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash.

Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss, sale of assets) as negative numbers using a minus sign. If there is no amount or an amount is zero, enter "0".

Fairchild, Lowes, and Howard Statement of Partnership Liquidation For the Period April 1030
							Capital
	Cash	+	Noncash Assets	=	Liabilities	+	Fairchild (1/4)	+	Lowes (1/4)	+	Howard (2/4)
Balances before realization	$fill in the blank 1		$fill in the blank 2		$fill in the blank 3		$fill in the blank 4		$fill in the blank 5		$fill in the blank 6
Sale of assets and division of loss	fill in the blank 7		fill in the blank 8		fill in the blank 9		fill in the blank 10		fill in the blank 11		fill in the blank 12
Balances after realization	$fill in the blank 13		$fill in the blank 14		$fill in the blank 15		$fill in the blank 16		$fill in the blank 17		$fill in the blank 18
Payment of liabilities	fill in the blank 19		fill in the blank 20		fill in the blank 21		fill in the blank 22		fill in the blank 23		fill in the blank 24
Balances after payment of liabilities	$fill in the blank 25		$fill in the blank 26		$fill in the blank 27		$fill in the blank 28		$fill in the blank 29		$fill in the blank 30
Receipt of deficiency	fill in the blank 31		fill in the blank 32		fill in the blank 33		fill in the blank 34		fill in the blank 35		fill in the blank 36
Balances	$fill in the blank 37		$fill in the blank 38		$fill in the blank 39		$fill in the blank 40		$fill in the blank 41		$fill in the blank 42
Cash distributed to partners	fill in the blank 43		fill in the blank 44		fill in the blank 45		fill in the blank 46		fill in the blank 47		fill in the blank 48
Final balances	$fill in the blank 49		$fill in the blank 50		$fill in the blank 51		$fill in the blank 52		$fill in the blank 53		$fill in the blank 54

2. Assume that the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency.

a. Journalize the entry to allocate the partner's deficiency. If an amount box does not require an entry, leave it blank.

Account	Debit	Credit
	fill in the blank 56	fill in the blank 57
	fill in the blank 59	fill in the blank 60
	fill in the blank 62	fill in the blank 63

b. Journalize the entry to distribute the remaining cash. If an amount box does not require an entry, leave it blank.

Account	Debit	Credit
	fill in the blank 65	fill in the blank 66
	fill in the blank 68	fill in the blank 69
	fill in the blank 71	fill in the blank 72