On March 1, 2017, Eckert and Kelley formed a partnership. Eckert contributed $80
ID: 2603392 • Letter: O
Question
On March 1, 2017, Eckert and Kelley formed a partnership. Eckert contributed $80,000 cash and Kelley contributed land valued at $64,000 and a building valued at $94,000. The partnership also assumed responsibility for Kelley’s $70,000 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 $31,500, both are to receive an annual interest allowance of 12% of their beginning-year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2017, Eckert withdrew $30,000 cash and Kelley withdrew $23,000 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 $76,000.
Required:
1a. & 1b. Prepare journal entries to record the partners' initial 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.
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Prepare journal entries to record the partners' initial capital investments and their subsequent cash withdrawals.
Journal entry worksheet
Record the partners' initial capital investment.
Note: Enter debits before credits.
Determine the partners’ shares of income, and then prepare journal entries to close Income Summary and the partners' Withdrawals accounts. (Enter all values as positive amounts.)
Determine the balances of the partners' capital accounts as of December 31, 2017.
Date General Journal Debit Credit Oct 20, 2017Explanation / Answer
Answer 1(a) & 1(b). Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Mar-17 Cash 80,000.00 Land 64,000.00 Building 94,000.00 Long term Notes Payable 70,000.00 Eckert, Capital 80,000.00 Kelly, Capital 88,000.00 (Record the partners' intial investments) 20-Oct-17 Eckert, Withdrawls 30,000.00 Kelly, Withdrawls 23,000.00 Cash 53,000.00 (record the partners' Withdrawls) Answer 1©. Allocation of Partnership Income Eckert Kelly Total Net Income - - 76,000.00 Salary Allowances 31,500.00 - 31,500.00 Balance of Income 44,500.00 Interest Allowances 9,600.00 10,560.00 20,160.00 Balance of Income 24,340.00 Balance Allocated Equally 12,170.00 12,170.00 24,340.00 Balance of Income - Share of Partners 53,270.00 22,730.00 Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-17 Eckert, Capital 30,000.00 Kelly, Capital 23,000.00 Eckert, Withdrawls 30,000.00 Kelly, Withdrawls 23,000.00 (Record the close of withdrawl accounts) 31-Dec-17 Income Summary 76,000.00 Eckert, Capital 53,270.00 Kelly, Capital 22,730.00 (record to close the Income Summary Account) Answer 2. Capital Account Balances Eckert Kelly Intial Investments 80,000.00 88,000.00 Withdrawls (30,000.00) (23,000.00) Share of Income 53,270.00 22,730.00 Ending Balances 103,270.00 87,730.00
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