On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $21,300 in cash and merchandise inventory valued at $56,390. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $59,940. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

	Wallaces Ledger	Agreed-Upon
	Balance	Valuation
Accounts Receivable	$18,470	$17,510
Allowance for Doubtful Accounts	1,130	1,420
Equipment	83,500	54,650
Accumulated Depreciation	29,900
Accounts Payable	14,810	14,810
Notes Payable (current)	36,170	36,170

The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $22,330 (Keene) and $30,500 (Wallace), and the remainder equally.

Required:

1.

Journalize the entries on March 1 to record the investments of Keene and Wallacein the partnership accounts.*

2.

Prepare a balance sheet as of March 1, 20Y8, the date of formation of the partnership of Keene and Wallace.*

3.

After adjustments at February 28, 20Y9, the end of the first full year of operations, the revenues were $303,250 and expenses were $212,900, for a net income of $90,350. The drawing accounts have debit balances of $27,850 (Keene) and $30,820 (Wallace). Journalizethe entries to close the revenues and expenses and the drawing accounts at February 28, 20Y9.*

*Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries.

CHART OF ACCOUNTSKeene and WallaceGeneral Ledger

	ASSETS
110	Cash
112	Accounts Receivable
113	Allowance for Doubtful Accounts
116	Merchandise Inventory
117	Office Supplies
119	Prepaid Insurance
120	Land
123	Equipment
124	Accumulated Depreciation-Equipment

	LIABILITIES
210	Accounts Payable
211	Notes Payable
212	Interest Payable
213	Sales Tax Payable

	EQUITY
310	Renee Wallace, Capital
311	Renee Wallace, Drawing
312	Eric Keene, Capital
313	Eric Keene, Drawing

	REVENUE
410	Revenues

EXPENSES

510

Expenses

521

Advertising Expense

522

Depreciation Expense-Equipment

529

Selling Expenses

533

Insurance Expense

534

Office Supplies Expense

536

Credit Card Expense

537

Cash Short and Over

538

Bad Debt Expense

539

Miscellaneous Expense

Journalize the entries on March 1 to record the investments of Keene and Wallacein the partnership accounts. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 5

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10

3. After adjustments at February 28, 20Y9, the end of the first full year of operations, the revenues were $303,250 and expenses were $212,900, for a net income of $90,350. The drawing accounts have debit balances of $27,850 (Keene) and $30,820 (Wallace). Journalizethe entries to close the revenues and expenses and the drawing accounts at February 28, 20Y9. Refer to the Chart of Accounts for exact wording of account titles. If required, round your answers to two decimal places.

PAGE 20

JOURNAL

ACCOUNTING EQUATION

DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

ASSETS

LIABILITIES

EQUITY

1

Closing Entries

2

3

4

5

6

7

8

9

2. Prepare a balance sheet as of March 1, 20Y8, the date of formation of the partnership of Keene and Wallace. Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Enter current assets in order of liquidity. Less, Add, or colons (:) will automatically appear if required.

Keene and Wallace

Balance Sheet

March 1, 20Y8

1	Assets
2
3
4
5
6
7
8
9
10
11	Liabilities
12
13
14
15
16	Partners Equity
17
18
19
20