On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $8,100 cash and merchandise inventory valued at $21,900. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $54,000. 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 $12,400 $10,000 Allowance for Doubtful Accounts 500 600 Merchandise Inventory 14,400 19,300 Equipment 24,300 23,600 Accumulated Depreciation-Equipment 8,100 Accounts Payable 4,400 4,400 Notes Payable (current) 2,700 2,700 The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $24,300 (Lang) and $14,800 (Capri), and the remainder equally. Required: 1. Journalize the entries to record the investments of (1) Lang and (2) 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: fill in the blank 35 fill in the blank 37 fill in the blank 39 fill in the blank 40 fill in the blank 42 Total current assets $ fill in the blank 43 Property, plant, and equipment: fill in the blank 45 Total assets $ fill in the blank 46 Liabilities Current liabilities: $ fill in the blank 48 fill in the blank 50 Total liabilities $ fill in the blank 51 Partners' Equity $ fill in the blank 53 fill in the blank 55 Total partners' equity fill in the blank 56 Total liabilities and partners' equity $ fill in the blank 57 3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $473,000 and expenses were $404,000, for a net income of $69,000. The drawing accounts have debit balances of $24,000 (Lang) and $21,000 (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 fill in the blank 59 fill in the blank 60 fill in the blank 62 fill in the blank 63 fill in the blank 65 fill in the blank 66 fill in the blank 68 fill in the blank 69 Mar. 31 fill in the blank 71 fill in the blank 72 fill in the blank 74 fill in the blank 75 fill in the blank 77 fill in the blank 78 fill in the blank 80 fill in the blank 81
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
On April 1, 20Y1, Whitney Lang and Eli Capri form a
| Capri's Ledger Balance |
Agreed-Upon Balance |
|||
| $12,400 | $10,000 | |||
| Allowance for Doubtful Accounts | 500 | 600 | ||
| Merchandise Inventory | 14,400 | 19,300 | ||
| Equipment | 24,300 | 23,600 | ||
| 8,100 | ||||
| Accounts Payable | 4,400 | 4,400 | ||
| Notes Payable (current) | 2,700 | 2,700 |
The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $24,300 (Lang) and $14,800 (Capri), and the remainder equally.
Required:
1.
| ACCOUNT | DEBIT | CREDIT | |
|---|---|---|---|
| Apr. 1 | |||
| Apr. 1 | |||
2. Prepare a
| Lang and Capri Balance Sheet April 1, 20Y1 |
|||
|---|---|---|---|
| Assets | |||
| Current assets: | |||
| fill in the blank 35 | |||
| fill in the blank 37 | |||
| fill in the blank 39 | fill in the blank 40 | ||
| fill in the blank 42 | |||
| Total current assets | $ fill in the blank 43 | ||
| Property, plant, and equipment: | |||
| fill in the blank 45 | |||
| Total assets | $ fill in the blank 46 | ||
| Liabilities | |||
| Current liabilities: | |||
| $ fill in the blank 48 | |||
| fill in the blank 50 | |||
| Total liabilities | $ fill in the blank 51 | ||
| Partners' Equity | |||
| $ fill in the blank 53 | |||
| fill in the blank 55 | |||
| Total partners' equity | fill in the blank 56 | ||
| Total liabilities and partners' equity | $ fill in the blank 57 |
3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $473,000 and expenses were $404,000, for a net income of $69,000. The drawing accounts have debit balances of $24,000 (Lang) and $21,000 (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 | fill in the blank 59 | fill in the blank 60 | |
| fill in the blank 62 | fill in the blank 63 | ||
| fill in the blank 65 | fill in the blank 66 | ||
| fill in the blank 68 | fill in the blank 69 | ||
| Mar. 31 | fill in the blank 71 | fill in the blank 72 | |
| fill in the blank 74 | fill in the blank 75 | ||
| fill in the blank 77 | fill in the blank 78 | ||
| fill in the blank 80 | fill in the blank 81 |
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