Owen and Choate formed a partnership on January 1, 2017. Owen contributed cash of $50,000; Choate

conveyed title to the following properties to the partnership.

Asset

Book value

Fair value

Land............................................................................................................ 15,000

28,000

Buildings and equipment........................................................................ 35,000

36,000

The partners agree to start their partnership with equal capital balances. No goodwill is to be

recognized.

According to the articles of partnership, profits and losses are allocated based on the following formula:

1. Owen will receive compensation in the amount of $1,000 monthly.

2. All remaining profits and losses will be based on a split of 60:40 to Choate and Owen

respectively.

3. Each partner can make an annual cash drawing of $5,000 beginning January 1, 2018.

Net income for 2017 was $15,000.

On January 1, 2018 Hamad is invited to join the partnership. Hamad will pay $54,000 to the partnership

and will receive a 40% interest.

Required:

1. Prepare journal entry to record the contributions of Owen and Choate to the partnership.

2. Prepare journal entry to close the income summary account into the individual partners

capital.

3. Prepare journal entry to record the admission of Hamad to the partnership.