Accounting for partner contributions, allocating profits and losses to the partners, preparing partnership financial statements.

Lorena Lally and Allie Raras formed a partnership on March 15, 2014. The partners agreed to contribute equal amounts of capital. Lally contributed her sole proprietorship's assets and liabilities (credit balances in parentheses) as follows:

Lally's Business

Book Value Current Market Value

Accounts Receivable $12,300 10,600

Merchandise Inventory 47,000 38,000

Prepaid Expenses 3,600 3,400

Store Equipment, Net 41,000 28,000

Accounts Payable (24,000) (24,000)

On March 15, Raras contributed cash in an amount equal to the current market value of Lally's partnership capital. The partners decided that Lally will earn 70% of partnership profits because she will manage the business. Raras agreed to accept 30% of the profits. During the period ended December 31, the partnership earned net income of $74,000. Lally's withdrawals were $42,000, and Raras's withdrawal's totaled $22,000

Requirements:

1. Journalize the partners' initial contributions.

2. Prepare the partnership balance sheet immediately after its formation on March 15, 2014

3. Journalize the closing of the Income Summary and partner Withdrawal accounts on December 31, 2014