On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees

Question

On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $20,900 in cash and merchandise inventory valued at $55,950. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,390. 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 on original investments at 10%, salary allowances of $22,800 (Keene) and $30,590 (Wallace), and the remainder equally.

Wallace’s Ledger Agreed-Upon Balance Valuation Accounts Receivable $19,370 $18,480 Allowance for Doubtful Accounts 1,240 1,520 Equipment 83,050 54,330 Accumulated Depreciation 29,920 – Accounts Payable 14,980 14,980 Notes Payable (current) 35,860 35,860

Explanation / Answer

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Mar Cash    20,900.00 Merchandise Inventory    55,950.00    Eric Keene, Capital      76,850.00 (To record the Eric Investment) 1-Mar Cash    39,940.00 Accounts Receivable    18,480.00 Equipment    54,330.00    Allowance for Doubtful Accounts        1,520.00    Accounts Payable      14,980.00    Notes Payable      35,860.00    Renee Wallace, Capital      60,390.00 (To record the Wallace Investment) Answer 2. Keene and Wallace Balance Sheet March 1, 20Y8 Assets Current Assets Cash      60,840.00 Accounts Receivable    18,480.00 Allowance for Doubtful Accounts    (1,520.00)      16,960.00 Merchandise Inventory      55,950.00 Total Current Assets    133,750.00 Property, Plant & Equipment Equipment      54,330.00 Total Assets    188,080.00 Liabilities & Partners' Equity Liabilities Current Liabilities Accounts Payable      14,980.00 Notes Payable      35,860.00 Total Current Liabilities      50,840.00 Other Liabilities                     -   Total Liabilities      50,840.00 Partners' Equity Eric Keene, Capital      76,850.00 Renee Wallace, Capital      60,390.00 Total Partners' Equity    137,240.00 Total Liabilities & Partners' Equity    188,080.00 Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Feb-28, 20Y9 Revenues    298,300.00    Income Summary    298,300.00 (To record the close of revenues accounts) Feb-28, 20Y9 Income Summary    208,700.00    Expenses    208,700.00 (To record the close of expenses accounts) Feb-28, 20Y9 Income Summary      89,600.00    Eric Keene, Capital      41,728.00    Renee Wallace, Capital      47,872.00 (to record the distribution of Net Income) Feb-28, 20Y9 Eric Keene, Capital      27,870.00 Renee Wallace, Capital      30,730.00    Eric Keene, Drawing      27,870.00    Renee Wallace, Drawing      30,730.00 (Tor record the drawings transf. to capital) Statement of Distribution of Income Eric Keene, Capital Renee Wallace, Capital Total Net Income                 89,600.00 Interest on capital - 10%                                      7,685.00                         6,039.00                 13,724.00 Salary Allowances                                   22,800.00                       30,590.00                 53,390.00 Balance                 22,486.00 Profit - Divide Equally                                   11,243.00                       11,243.00                 22,486.00 Total Profit                                   41,728.00                       47,872.00

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