Question
Entries and Balance Sheet for Partnership On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and
Entries and Balance Sheet for Partnership
On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $120,000. 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 | $45,700 | $43,400 | ||
Allowance for Doubtful Accounts | 3,200 | 3,500 | ||
Merchandise Inventory | 31,500 | 28,900 | ||
Equipment | 89,500 | 63,400 | ||
Accumulated DepreciationEquipment | 19,000 | |||
Accounts Payable | 23,400 | 23,400 | ||
Notes Payable (current) | 15,000 | 15,000 |
The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $36,000 (Lang) and $22,000 (Capri), and the remainder equally.
Required:
1. Journalize the entries to record the investments of Lang and 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 $598,000 and expenses were $480,000, for a net income of $118,000. The drawing accounts have debit balances of $40,000 (Lang) and $30,000 (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 | |||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started