The partnership of Avery and Kirk was formed on July 1, when George Avery and Di
ID: 2349035 • Letter: T
Question
The partnership of Avery and Kirk was formed on July 1, when George Avery and Dinah Kirk agreed to invest equal amounts and to share profits and losses equally. The investment by Avery consists of $30,000 cash and an inventory of merchandise valued at $56,000. Kirk also is to contribute a total of $86,000. However, it is agreed that her contributions will consist of the transfer of both assets of her business and its liabilities (listed below). A list of the agreed values of the various items as well as their carrying values on Kirk s records follows. Kirk also contributes enough cash to bring her capital account to $86,000.a. draft entries in general journal form to record the investments of Avery and Kirk in the new partnership
b. prepare the beginning balance sheet of the partnership in report form at the close of business july 1 reflecting the above transfers to the firm
c. on the following june 30 after one year of operation the income summary account showed a credit balance of 74,000 and the drawing account for each partner showed a debit balance of 31,000. prepare journal entries to close the income summary account and the drawing accounts at june 30
Explanation / Answer
A. Debit: Inventory 56,000 Debit: Cash 30,000 Credit: Avery, Capital 86,000 Debit: Accounts receivable 79,600 Debit: Inventory 12,800 Debit: Cash 9,400 Debit: Office equipment 9,000 Credit: Kirk, capital 86,000 Credit: Accounts payable 24,800 B. Assets: Cash 39,400 Accounts receivable 79,600 Inventory 68,800 Office equipment 9,000 Total assets 196,800 Liabilities and owners' equity: Liabilities Accounts payable 24,800 Owners' equity Avery, capital 86,000 Kirk, capital 86,000 Total Owners' equity 172,000 Total liabilites and owners' equity 196,800 C. Debit: Income sumary 74,000 Credit: Avery, capital 37,000 Credit: Kirk, capital 37,000 Debit: Avery, capital 31,000 Debit: Kirk, capital 31,000 Credit: Avery, Drawing 31,000 Credit: Kirk, drawing
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