On March 1, Eckert and Kelley formed a partnership. Eckert contributed $81,000 cash, and Kelley contributed...

On March 1, Eckert and Kelley formed a partnership. Eckert contributed $81,000 cash, and Kelley contributed land valued at $64,800 and a building valued at $94,800. The partnership also took Kelley’s $71,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Eckert gets an annual salary allowance of $29,000, both get an annual interest allowance of 9% of their initial capital investment, and any remaining income or loss is shared equally. On October 20, Eckert withdrew $30,000 cash and Kelley withdrew $23,000 cash. After adjusting and closing entries are made to the revenue and expense accounts at December 31, the Income Summary account had a credit balance of $90,000. Required: 1a. & 1b. Prepare journal entries to record the partners' initial capital 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

Expert Solution

1a
Mar-01	Cash	81000
	Eckert Capital		81000
	(To record capital contribution in cash)


	Land	64800
	Building	94800
	Longtern Note Payable		71000
	Kelley Capital		88600
	(To record Capital contribution of Kelley)

Oct-20	Erckert Withdrawal account	30000
	To cash		30000
	(To record Withdrawal of cash)

	Kelley Withdrawal account	23000
	To cash		23000
	(To record Withdrawal of cash)

1c	Credit Balance in Income summary	90000
	Less : Annual Salary of Eckert	-29000
	Less : Interest on Capital for 10 month
	Eckert 810009%10/12	-6075
	Kelley 886009%10/12	-6645
	Balance	48280
	Share equally
	Eckert	24140
	Kelley	24140


	Income Summary	90000
	Eckert Capital		59215
	Kelley		30785
	(To record The transfer of Income summary as Share profit, Interest o Capital and Salary to capital account)

	Eckert Capital	30000
	Erckert Withdrawal account		30000
	(To record the transfer of withdrawal to capital)

	Kelley Capital	23000
	Kelley Withdrawal account		23000
	(To record the transfer of withdrawal to capital)


2		Eckert	Kelley
	Opening balance	81000	88600
	Add: Salary	29000	0
	Add: Interest on Capital	6075	6645
	Add : Share of Profit	24140	24140
	Less : Withdrawal	-30000	-23000
		110215	96385

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