Question

On March 1, 2017, Eckert and Kelley formed a partnership. Eckert contributed $80,000 cash and Kelley contributed land valued at $64,000 and a building valued at $94,000. The partnership also assumed responsibility for Kelley’s $70,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Eckert is to receive an annual salary allowance of $31,500, both are to receive an annual interest allowance of 12% of their beginning-year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2017, Eckert withdrew $30,000 cash and Kelley withdrew $23,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at December 31, 2017, the Income Summary account had a credit balance of $76,000.

Required:
1a. & 1b. Prepare journal entries to record the partners' initial investments and their subsequent cash withdrawals.
1c. Determine the partners' shares of income, and then prepare journal entries to close Income Summary and the partners' Withdrawals accounts.
2. Determine the balances of the partners’ capital accounts as of December 31, 2017.

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Prepare journal entries to record the partners' initial capital investments and their subsequent cash withdrawals.

Journal entry worksheet

Record the partners' initial capital investment.

Note: Enter debits before credits.

Date General Journal Debit Credit Oct 20, 2017

Record the cash withdrawal of Eckert ($30,000) and Kelley ($23,000).
	Date General Journal Debit Credit Mar 01, 2017

Determine the partners’ shares of income, and then prepare journal entries to close Income Summary and the partners' Withdrawals accounts. (Enter all values as positive amounts.)

	Allocation of Partnership Income Eckert Kelley Total Net Income Salary allowances 0 Balance of income Interest allowances 0 Balance of income Balance allocated equally 0 Balance of income $0 Shares of the partners $0 $0 Date General Journal Debit Credit Record the entry to close the partners' withdrawals accounts. Dec 31, 2017 Record the entry to close the income summary account. Dec 31, 2017

Determine the balances of the partners' capital accounts as of December 31, 2017.

	Capital Account Balances Eckert Kelley Initial investment Withdrawals Share of income Ending balances $0 $0

Answer 1

Answer 1(a) & 1(b).
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1-Mar-17	Cash	80,000.00
	Land	64,000.00
	Building	94,000.00
	Long term Notes Payable		70,000.00
	Eckert, Capital		80,000.00
	Kelly, Capital		88,000.00
	(Record the partners' intial investments)
20-Oct-17	Eckert, Withdrawls	30,000.00
	Kelly, Withdrawls	23,000.00
	Cash		53,000.00
	(record the partners' Withdrawls)
Answer 1©.
	Allocation of Partnership Income
		Eckert	Kelly	Total
	Net Income	-	-	76,000.00
	Salary Allowances	31,500.00	-	31,500.00
	Balance of Income			44,500.00
	Interest Allowances	9,600.00	10,560.00	20,160.00
	Balance of Income			24,340.00
	Balance Allocated Equally	12,170.00	12,170.00	24,340.00
	Balance of Income			-
	Share of Partners	53,270.00	22,730.00
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
31-Dec-17	Eckert, Capital	30,000.00
	Kelly, Capital	23,000.00
	Eckert, Withdrawls		30,000.00
	Kelly, Withdrawls		23,000.00
	(Record the close of withdrawl accounts)
31-Dec-17	Income Summary	76,000.00
	Eckert, Capital		53,270.00
	Kelly, Capital		22,730.00
	(record to close the Income Summary Account)
Answer 2.
	Capital Account Balances	Eckert	Kelly
	Intial Investments	80,000.00	88,000.00
	Withdrawls	(30,000.00)	(23,000.00)
	Share of Income	53,270.00	22,730.00
	Ending Balances	103,270.00	87,730.00