On March 1, 2013, Eckert and Kelley formed a partnership. Eckert contributed $99

Question

On March 1, 2013, Eckert and Kelley formed a partnership. Eckert contributed $99,000 cash and Kelley contributed land valued at $79,200 and a building valued at $109,200. The partnership also assumed responsibility for Kelley’s $89,000 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 $31,000, both are to receive an annual interest allowance of 8% of their beginning-year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2013, Eckert withdrew $32,000 cash and Kelley withdrew $25,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at December 31, 2013, the Income Summary account had a credit balance of $85,000. (1a). Prepare journal entry to record the partners' initial capital investments.

Explanation / Answer

(1a)

Journal entry for recording partner's initial cpaital investments:

Eckert

Kelley

Date Particulars LF Amount $ Amount $ March 1, 2013 Cash A/c Dr. 99,000 To Eckert's Capital 99,000 (Being entry made for initial investment of Partner Eckert)

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