Question

On March 1, 2016, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $21,550 in cash and merchandise inventory valued at $55,670. McKee invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,190. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

	McKee’s Ledger	Agreed-Upon
	Balance	Valuation
Accounts Receivable	$18,650	$17,790
Allowance for Doubtful Accounts	1,560	1,820
Equipment	83,430	55,140
Accumulated Depreciation	29,580	–
Accounts Payable	15,350	15,350
Notes Payable (current)	35,500	35,500

The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $22,170 (Keene) and $30,810 (McKee), and the remainder equally.

	Required:
1.	Journalize the entries on March 1 to record the investments of Keene and McKee in the partnership accounts.*
2.	Prepare a balance sheet as of March 1, 2016, the date of formation of the partnership of Keene and McKee.*
3.	After adjustments and the closing of revenue and expense accounts at February 28, 2017, the end of the first full year of operations, the income summary account has a credit balance of $89,670, and the drawing accounts have debit balances of $27,510 (Keene) and $30,160 (McKee). Journalize the entries on February 28 to close the income summary account and the drawing accounts at February 28, 2017.* *Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries.

Journal

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1. Journalize the entries on March 1 to record the investments of Keene and McKee in the partnership accounts. Refer to the Chart of Accounts for exact wording of account titles.

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PAGE 5

JOURNAL

Score: 123/123

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	✔	✔		✔
2		✔		✔
3		✔			✔
4	✔	✔		✔
5		✔		✔
6		✔		✔
7		✔			✔
8		✔			✔
9		✔			✔
10		✔			✔

Points:

22 / 22

Feedback

Check My Work

Record assets and liabilities at their current values and record the appropriate allowance accounts if necessary for partner contributions, along with offsetting entries to the appropriate capital accounts.

3. After adjustments and the closing of revenue and expense accounts at February 28, 2017, the end of the first full year of operations, the income summary account has a credit balance of $89,670, and the drawing accounts have debit balances of $27,510 (Keene) and $30,160 (McKee). Journalize the entries on February 28 to close the income summary account and the drawing accounts. Refer to the Chart of Accounts for exact wording of account titles. If required, round your answers to two decimal places.

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

PAGE 20

JOURNAL

Score: 4/87

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Closing Entries
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Points:

0.74 / 16

Feedback

Check My Work

Set up a column for each member and a total column. Allocate salary allowances and interest allowances. Allocate remaining income. Close Income Summary to the capital accounts. Close the drawing accounts to the capital accounts.

Labels and Amount Descriptions

Labels	Amount Descriptions
Current assets	Total assets
Current liabilities	Total current assets
Plant assets	Total liabilities
	Total liabilities and members’ equity
	Total liabilities and partners’ equity
	Total members’ equity
	Total partners’ equity

Balance Sheet

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2. Prepare a balance sheet as of March 1, 2016, the date of formation of the partnership of Keene and McKee. Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Enter current assets in order of liquidity. “Less”, “Add”, or colons (:) will automatically appear if required.

Question not attempted.

Score: 0/130

Keene and McKee

Balance Sheet

March 1, 2016

1	Assets
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3
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11	Liabilities
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16	Partners’ Equity
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Answer 1