Washington and Jacobs formed a partnership on March 15, 2018. The partners agreed to contribute equal amounts of capital. Washington contributed her sole proprietorship’s assets and liabilities (credit balances in parentheses) as follows: Washington’s Business Book Value Current Market Value Accounts Receivable $ 12,200 $ 10,500 Merchandise Inventory 42,000 35,000 Prepaid Expenses 3,500 2,800 Store Equipment, Net 42,000 23,000 Accounts Payable (26,000) (26,000) On March 15, Jacobs contributed cash in an amount equal to the current market value of Washington’s partnership capital. The partners decided that Washington will earn 60% of partnership profits because she will manage the business. Jacobs agreed to accept 40% of the profits. During the period ended December 31, the partnership earned net income of $72,000. Washington’s withdrawals were $36,000, and Jacobs’s withdrawals totaled $26,000. Requirements Journalize the partners’ initial contributions. Prepare the partnership balance sheet immediately after its formation on March 15, 2018. Journalize the closing of the Income Summary and Partner Withdrawal accounts on December 31, 2018.
Washington and Jacobs formed a partnership on March 15, 2018. The partners agreed to contribute equal amounts of capital. Washington contributed her sole proprietorship’s assets and liabilities (credit balances in parentheses) as follows: Washington’s Business Book Value Current Market Value Accounts Receivable $ 12,200 $ 10,500 Merchandise Inventory 42,000 35,000 Prepaid Expenses 3,500 2,800 Store Equipment, Net 42,000 23,000 Accounts Payable (26,000) (26,000) On March 15, Jacobs contributed cash in an amount equal to the current market value of Washington’s partnership capital. The partners decided that Washington will earn 60% of partnership profits because she will manage the business. Jacobs agreed to accept 40% of the profits. During the period ended December 31, the partnership earned net income of $72,000. Washington’s withdrawals were $36,000, and Jacobs’s withdrawals totaled $26,000. Requirements Journalize the partners’ initial contributions. Prepare the partnership balance sheet immediately after its formation on March 15, 2018. Journalize the closing of the Income Summary and Partner Withdrawal accounts on December 31, 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Washington and Jacobs formed a
|
|
Washington’s Business |
|
|
|
Book Value |
Current Market Value |
|
|
$ 12,200 |
$ 10,500 |
|
Merchandise Inventory |
42,000 |
35,000 |
|
Prepaid Expenses |
3,500 |
2,800 |
|
Store Equipment, Net |
42,000 |
23,000 |
|
Accounts Payable |
(26,000) |
(26,000) |
On March 15, Jacobs contributed cash in an amount equal to the current market value of Washington’s partnership capital. The partners decided that Washington will earn 60% of partnership profits because she will manage the business. Jacobs agreed to accept 40% of the profits. During the period ended December 31, the partnership earned net income of $72,000. Washington’s withdrawals were $36,000, and Jacobs’s withdrawals totaled $26,000.
Requirements
- Journalize the partners’ initial contributions.
- Prepare the partnership
balance sheet immediately after its formation on March 15, 2018. - Journalize the closing of the Income Summary and Partner Withdrawal accounts on December 31, 2018.
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