Question
On March 1, 2016, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $20,890 in cash and merchandise inventory valued at $56,320.
On March 1, 2016, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $20,890 in cash and merchandise inventory valued at $56,320. McKee invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $59,510. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:
The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $22,150 (Keene) and $30,150 (McKee), and the remainder equally.
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1. | Journalize the entries on March 1 to record the investments of Keene and McKee in the partnership accounts.* | |||||||||||||||||||||||||||||||||||||||||||||||||||
2. | Prepare a balance sheet as of March 1, 2016, the date of formation of the partnership of Keene and McKee.* | |||||||||||||||||||||||||||||||||||||||||||||||||||
3. | After adjustments and the closing of revenue and expense accounts at February 28, 2017, the end of the first full year of operations, the income summary account has a credit balance of $90,470, and the drawing accounts have debit balances of $27,820 (Keene) and $30,550 (McKee). Journalize the entries on February 28 to close the income summary account and the drawing accounts at February 28, 2017.*
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