Question

Entries and Balance Sheet for Partnership On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $15,100 cash and merchandise inventory valued at $40,800. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $101,000. 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 $23,100 $18,700 Allowance for Doubtful Accounts 1,000 1,300 Merchandise Inventory 26,900 36,000 Equipment 45,300 43,900 Accumulated Depreciation-Equipment 15,100 Accounts Payable 8,200 8,200 Notes Payable (current) 5,000 5,000
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.
ACCOUNT DEBIT CREDIT
Apr. 1
Apr. 1
2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.
Lang and Capri
Balance Sheet
April 1, 20Y1
Assets
Current assets:
Total current assets $
Property, plant, and equipment:
Total assets $
Liabilities
Current liabilities:
$
Total liabilities $
Partners' Equity
$
Total partners' equity
Total liabilities and partners' equity $
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.
ACCOUNT DEBIT CREDIT
Mar. 31
Mar. 31

Answer 1

Answer:

1. April 1, 20Y1

Dr Bank $15,100

Dr Inventory $40,800

Cr Whitney Lang Capital $55,900

April 1, 20Y1

Dr Bank $52,900

Dr Equipment 43,900

Dr Account Receivable $18,700

Cr Account Payable $8,200

Cr Notes Payable 5,000

Cr Allowance for Doubtful $1,300

Cr Eli Capri Capital $101,000

2.CURRENT LIABILITIES $171,400

ASSETS $171,400

3. March 31, 20Y2

Dr Revenue $598,000

Cr Expenses $480,000

Cr Profit & Loss $118,000

March 31, 20Y2

Dr Whitney Lang Capital $40,000

Dr Eli Capri Capital $30,000

Cr Cash $70,000

Explanation:

1. Preparation of the journal entries to record the investments of Lang and Capri in the partnership accounts.

April 1, 20Y1

Dr Bank $15,100

Dr Inventory $40,800

Cr Whitney Lang Capital $55,900

($15,100+$40,800)

( Being Cash and Inventory received from Eric Keene as capital contribution)

April 1, 20Y1

Dr Bank $52,900

($101,000+$1,300+5,000+$8,200-43,900-$18,700)

Dr Equipment 43,900

Dr Account Receivable $18,700

Cr Account Payable $8,200

Cr Notes Payable 5,000

Cr Allowance for Doubtful $1,300

Cr Eli Capri Capital $101,000

( Being Capital Contribution by Renee Wallace in form of Assets, cash and Liabilities)

2. Preparation of a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri.

Balance sheet as on April 1, 20Y1,

Particulars Amount($)

Partners Capital A/c

Whitney Lang $55,900

Eli Capri $101,000

$156,900

CURRENT LIABILITIES

Account Payable $8,200

Notes Payable $5,000

Allowance for doubtful Debts $1,300

TOTAL $171,400

($156,900+$8,200+$5,000+$1,300)

ASSETS

Equipment $43,900

Account receivable $18,700

Inventory $40,800

Cash $68,000

($15,100+$52,900)

TOTAL $171,400

($43,900+$18,700+$40,800+$68,000)

3. Preparation of journal entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2

March 31, 20Y2

Dr Revenue $598,000

Cr Expenses $480,000

Cr Profit & Loss $118,000

( Being Revenue and Expenses posted to Profit & loss A/c)

March 31, 20Y2

Dr Whitney Lang Capital $40,000

Dr Eli Capri Capital $30,000

Cr Cash $70,000

($40,000+$30,000)

( Being Drawing from Capital A/c recorded)