Entries and Balance Sheet for Partnership On April 1, 20Y1, Whitney Lang and Eli
ID: 2529967 • Letter: E
Question
Entries and Balance Sheet for Partnership
On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $120,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:
The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $36,000 (Lang) and $22,000 (Capri), and the remainder equally.
Required:
1. Journalize the entries to record the investments of Lang and 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 $598,000 and expenses were $480,000, for a net income of $118,000. The drawing accounts have debit balances of $40,000 (Lang) and $30,000 (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.
Capri's LedgerBalance Agreed-Upon
Balance Accounts Receivable $45,700 $43,400 Allowance for Doubtful Accounts 3,200 3,500 Merchandise Inventory 31,500 28,900 Equipment 89,500 63,400 Accumulated Depreciation—Equipment 19,000 Accounts Payable 23,400 23,400 Notes Payable (current) 15,000 15,000
Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Apr Cash 18,000.00 Merchandise Inventory 50,000.00 Whitney Lang, Capital 68,000.00 (To record the Lang Investment) 1-Apr Cash 26,200.00 Accounts Receivable 43,400.00 Merchandise Inventory 28,900.00 Equipment 63,400.00 Allowance for Doubtful Accounts 3,500.00 Accounts Payable 23,400.00 Notes Payable 15,000.00 Eli Capri, Capital 120,000.00 (To record the Capri Investment) Answer 2. Lang and Capri Balance Sheet April 1, 20Y1 Assets Current Assets Cash 44,200.00 Accounts Receivable 43,400.00 Allowance for Doubtful Accounts (3,500.00) 39,900.00 Merchandise Inventory 78,900.00 Total Current Assets 163,000.00 Property, Plant & Equipment Equipment 63,400.00 Total Assets 226,400.00 Liabilities & Partners' Equity Liabilities Current Liabilities Accounts Payable 23,400.00 Notes Payable 15,000.00 Total Current Liabilities 38,400.00 Other Liabilities - Total Liabilities 38,400.00 Partners' Equity Whitney Lang, Capital 68,000.00 Eli Capri, Capital 120,000.00 Total Partners' Equity 188,000.00 Total Liabilities & Partners' Equity 226,400.00 Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Mar Income Summary 118,000.00 Whitney Lang, Capital 63,400.00 Eli Capri, Capital 54,600.00 (to record the distribution of Net Income) 31-Mar Whitney Lang, Capital 40,000.00 Eli Capri, Capital 30,000.00 Whitney Lang, Drawing 40,000.00 Eli Capri, Drawing 30,000.00 (Tor record the drawings transf. to capital) Statement of Distribution of Income Whitney Lang, Capital Eli Capri, Capital Total Net Income 118,000.00 Interest on capital - 10% 6,800.00 12,000.00 18,800.00 Salary Allowances 36,000.00 22,000.00 58,000.00 Balance 41,200.00 Profit - Divide Equally 20,600.00 20,600.00 41,200.00 Total Profit 63,400.00 54,600.00
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