Question

On March 1, Eckert and Kelley formed a partnership. Eckert contributed $93,000 cash, and Kelley contributed land valued at $74,400 and a building valued at $104,400. The partnership also took Kelley’s $83,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Eckert gets an annual salary allowance of $30,500, both get an annual interest allowance of 10% of their initial capital investment, and any remaining income or loss is shared equally. On October 20, Eckert withdrew $29,000 cash and Kelley withdrew $22,000 cash. After adjusting and closing entries are made to the revenue and expense accounts at December 31, the Income Summary account had a credit balance of $82,000. 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

Answer 1

carbs Date Credit Mar. 1 General Journal Debit Cash $93,000 hand $74,400 Building $ 104,400 Long team note payable $ 83,000 Eckert, Capital $95,800 Kelley, Capital $93,000 (to second investments and withdrawaly Calculation: Eckest contribetled cash = $93,000 So, Cash = $93,000 and Eckert, Capital & $93,000 Kelley, Capital = hand & Brulding - Long term note payable = $74,400 + $104,400 - $83,000 = $95,000 Allocation of Partnership Income Eckert kelley Total Met Income $82,000 Salary Allowances $30,500 $30,500 balance of income $51,500 Interest Allowances $9,500 $9,300 $ 18,880 Balance of income $32, 620 Balance allocated equally $ 16,310 $16,310 $32, 620 balance of income 1$ o I shares of the partners ($56,390 $25,610)

Calculation. Interest allowances - Capital & Interest a Kert: Interest Allowances - $95,800 x 10% = $9,580 Relley: Interest Allowances = $93,000 & 10% = $9,300 Balance allocated equally & Balance of income – 2 Balance allocated equally = $32,620 +2 & 16,310 Date credit Dec 31 L General Journal Debit Eckest, Capital $29,000 Kelley, Capital $ 22,000 Eckert, withdrawals Kelley, withdrawals. (To record partners withdrawal) $ 29,000 $ 22,000 $82,000 Dec 31 Income Summary Eckert, capital Kelley, Capital I (To close income summary) $56,390 $25,610 d Capital account balances Initial investment withdrawals Share of income Ending Balances Eckert kelley $95,800 $93,000 $129,000) $20,000) $56,390 $25,610 $ 123,190 $ 96,610