Tom and Julie formed a management consulting partnership on January 1, 2014. The fair value of the net assets invested by each partner follows:

Tom Julie

Cash $13,000 $12,000

Accounts receivable 8,000 6,000

Office supplies 2,000 800

Office equipment 30,000

Land 30,000

Accounts payable 2,000 5,000

Mortgage payable 18,800

During the year, Tom withdrew $15,000 and Julie withdrew $12,000 in anticipation of operating profits. Net profit for 2014 was $50,000, which is to be allocated based on the original net capital investment.

Required:

A. Prepare journal entries to:

1. Record the initial investment in the partnership.

2. Record the withdrawals.

3. Close the Income Summary and Drawing accounts.

B. Prepare a statement of changes in partners capital for the year ended December 31, 2014.