On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $8,100 cash and merchandise inventory valued at $21,900. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $54,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:
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Capri's Ledger
Balance
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Agreed-Upon
Balance
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Accounts Receivable |
$12,400 |
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$10,000 |
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Allowance for Doubtful Accounts |
500 |
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600 |
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Merchandise Inventory |
14,400 |
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19,300 |
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Equipment |
24,300 |
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23,600 |
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Accumulated Depreciation-Equipment |
8,100 |
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Accounts Payable |
4,400 |
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4,400 |
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Notes Payable (current) |
2,700 |
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2,700 |
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The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $24,300 (Lang) and $14,800 (Capri), and the remainder equally.
Required:
1.Journalize the entries to record the investments of (1) Lang and (2) Capri in the partnership accounts. For a compound transaction, if an amount box does not require an entry, leave it blank.
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CREDIT |
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Apr. 1 |
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Apr. 1 |
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2.Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.
Lang and Capri
Balance Sheet
April 1, 20Y1 |
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Assets |
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Current assets: |
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fill in the blank 35 |
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fill in the blank 37 |
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fill in the blank 39 |
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fill in the blank 42 |
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Total current assets |
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$ fill in the blank 43 |
Property, plant, and equipment: |
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fill in the blank 45 |
Total assets |
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$ fill in the blank 46 |
Liabilities |
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Current liabilities: |
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$ fill in the blank 48 |
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fill in the blank 50 |
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Total liabilities |
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$ fill in the blank 51 |
Partners' Equity |
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$ fill in the blank 53 |
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fill in the blank 55 |
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Total partners' equity |
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fill in the blank 56 |
Total liabilities and partners' equity |
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$ fill in the blank 57 |
3.After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $473,000 and expenses were $404,000, for a net income of $69,000. The drawing accounts have debit balances of $24,000 (Lang) and $21,000 (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.
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ACCOUNT |
DEBIT |
CREDIT |
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Mar. 31 |
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fill in the blank 59 |
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Mar. 31 |
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fill in the blank 71 |
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fill in the blank 74 |
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fill in the blank 80 |
fill in the blank 81 |