Question

Entries and Balance Sheet for Partnership On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $9,300 cash and merchandise inventory valued at $25,100. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $62,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

Capri's Ledger Balance		Agreed-Upon Balance
Accounts Receivable	$14,200		$11,500
Allowance for Doubtful Accounts	600		800
Merchandise Inventory	16,600		22,200
Equipment	27,900		27,100
Accumulated Depreciation-Equipment	9,300
Accounts Payable	5,000		5,000
Notes Payable (current)	3,100		3,100

The partnership agreement includes the following provisions regarding the division of net income: interest of 12% on original investments, salary allowances of $27,900 (Lang) and $17,000 (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. 2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.

3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $465,000 and expenses were $389,000, for a net income of $76,000. The drawing accounts have debit balances of $27,000 (Lang) and $23,000 (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.

Answer 1

PART 1

date account titles and explanation debit credit

Apr-01 cash 9300

merchandise inventory 25100

whitney land, capital 34400

Apr-01 cash (balancing figure) 10100

accounts receivable 11500

merchandise inventory 22200

equipment 27100

allowance of doubtful accounts 800

accounts payable 5000

notes payable 3100

eli capri, capital 62000

CASh = 800+5000+3100+62000-(11500+22200+27100)

Land and Capri

balance sheet

April 1, 20Y1

Assets

Current assets:

Cash 19400 (9300+10100)

Accounts receivable 11500

Less allowance for doubtful accounts -800 10700

Merchandise inventory 47300 (25100+22200)

Total current assets 77400

Plant assets:

Equipment 27100

Total assets 104500

Liabilities

Current liabilities:

Accounts payable 5000

Notes payable 3100

Total liabilities 8100

Partners' Equity

Whitney Lang, capital 34400

Eli Capri, capital 62000

Total partners' equity 96400

Total liabilities and partners' equity 104500

PART 3

date account titles and explanation debit credit

Mar-01 Income Summary 76000

Whitney Lang, Capital 41794

Eli Capri, Capital 34206

Mar-01 Whitney Lang, Capital 27000

Eli Capri, Capital 23000

Whitney Lang, Drawing 27000

Eli Capri, Drawing 23000

Schedule:

lang capri

Total Interest allowance 4128 7440

34400*12% 62000*12%

Salary allowance 27900 17000

Remaining income 9766 9766

Net income 41794 34206

remaining income for each = (76000-(4128+7440+27900+17000))*50%