Question

On February 1, 2020, Tessa Williams and Audrey Xle formed a partnership In Ontarlo. Williams contributed $92,000 cash and Xle contributed land valued at $132,000 and a small building valued at $192,000. Also, the partnership assumed responsibility for Xle's $142,000 long-term note payable associated with the land and building. The partners agreed to share profit or loss as follows: Williams Is to receive an annual salary allowance of $102,000, both are to receive an annual Interest allowance of 15% of thelr original capital Investments, and any remaining profit or loss is to be shared equally. On November 20, 2020, Williams withdrew cash of $72,000 and Xie withdrew $57,000. After the adjusting entries and the closing entries to the revenue and expense accounts, the Income Summary account had a credit balance of $172,000. Required: 1. Present general Journal entries to record the initial capital Investments of the partners, their cash withdrawals, and the December 31 closing of the Income Summary and withdrawals accounts. View transaction list Journal entry worksheet < 3 > Record the initial capital investments. Note: Enter debits before credits. General Journal Debit Credit Date February 01, 2020 Record entry Clear entry View general journal

Answer 1

Credit Debit $ 92,000 1) Date Accounts Feb-01 Cash Tessa Williams Capital (Capital Introduced by Williams) $ 92,000 $ 132,000 $ 192,000 Land Building Long term Notes Payable Xie Capital (Capital Introduced by Xie) $ 142,000 $ 182,000 $ 57,000 2) Nov-20 Tessa Williams's Withdrawal (or Drawings) $ 72,000 Cash (to record Partner withdrawal) Nov-20 Xie's Withdrawal (or Drawings) $ 57,000 Cash (to record Partner withdrawal) $ 57,000

3) Allocation of Income Summary account Williams Xie Total Net Income $172,000 Salary Allowance $ 102,000 $102,000 Balance of Income $ 70,000 Interest Allowance (15%) $ 13,800 $ 27,300 $ 41,100 Balance of Income $ 28,900 Balance allocated Equally (1:1) $ 14,450 $ 14,450 $ 28,900 Balance of Income $ Share of Partner $ 130,250 $ 41,750 $172,000 (Interest Allowance = Capital * 15%) $ 172,000 Dec-31 Income Summary Tessa Williams Capital Xie Capital |(to close income summary) $ 130,250 $ 41,750

4) Dec-31 Tessa Williams Capital $ 72,000 Xie Capital $ 57,000 Tessa Williams's Withdrawal (or Drawings) Xie's Withdrawal (or Drawings) |(to Close withdrawal account) $ 72,000 $ 57,000 2) Partnership account balance Williams Xie Beginning Capital $ 92,000 $ 182,000 Add : Interest on capital $ 13,800 $ 27,300 Salary Allowance $ 102,000 $ Share of Profit $ 14,450 $ 14,450 Less : Drawings $ (72,000) $ (57,000) Balance on 31 Dec $ 150,250 $ 166,750