Question
Entries and Balance Sheet for Partnership On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $12,300 cash and
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Entries and Balance Sheet for Partnership
On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $12,300 cash and merchandise inventory valued at $33,200. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $82,000. 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 $18,800 $15,200 Allowance for Doubtful Accounts 800 1,000 Merchandise Inventory 21,900 29,300 Equipment 36,900 35,800 Accumulated Depreciation-Equipment 12,300 Accounts Payable 6,600 6,600 Notes Payable (current) 4,100 4,100 The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $36,900 (Lang) and $22,500 (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 Apr. 1 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: Total current assets $ Property, plant, and equipment: Total assets $ Liabilities Current liabilities: $ Total liabilities $ Partners' Equity $ Total partners' equity Total liabilities and partners' equity $ 3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $400,000 and expenses were $293,000, for a net income of $107,000. The drawing accounts have debit balances of $37,000 (Lang) and $32,000 (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 Mar. 31
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