On March 1, 2017, Eckert and Kelley formed a partnership. Eckert contributed $82
ID: 2408335 • Letter: O
Question
On March 1, 2017, Eckert and Kelley formed a partnership. Eckert contributed $82,500 cash and Kelley contributed land valued at $60,000 and a building valued at $100,000. The partnership also assumed responsibility for Kelley’s $92,500 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 $25,000, both are to receive an annual interest allowance of 10% of their beginning-year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2017, Eckert withdrew $34,000 cash and Kelley withdrew $20,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at December 31, 2017, the Income Summary account had a credit balance of $90,000.
Required:
1a. & 1b. Prepare journal entries to record the partners' initial capital investments and their subsequent cash withdrawals.
1c. Determine the partners’ shares of income, and then prepare journal entries to close Income Summary and the partners' Withdrawals accounts.
2. Determine the balances of the partners' capital accounts as of December 31, 2017.
Explanation / Answer
1A&1B:
1C:
2:
No Date General Ledger Debit Credit 1 March 1, 2017 Cash 82,500.00 Land 60,000.00 Building 100,000.00 Long term note payable 92,500.00 Eckert, Capital 82,500.00 Kelley, Capital 67,500.00 2 October 20, 2017 Eckert, Withdrawals 34,000.00 Kelley, Withdrawals 20,000.00 Cash 54,000.00Related Questions
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