The partnership of Par and Boo was formed and commenced operations on March 1, 2011, with Par contributing $30,000 cash and Boo investing cash of $10,000 and equipment with an agreed-upon valuation of $20,000. On July 1, 2011, Boo invested an additional $10,000 in the partnership. Par made a capital withdrawal of $4,000 on May 2, 2011, but reinvested the $4,000 on October 1, 2011. During 2011, Par withdrew $800 per month, and Boo, the managing partner, withdrew $1,000 per month. These drawings were charged to Salaries to partners. A preclosing trial balance taken at December 31, 2011, is as follows:
| Debit | Credit |
Cash | $9,000 |
|
Receivables—net | 15,000 |
|
Equipment—net | 50,000 |
|
Other assets | 19,000 |
|
Liabilities |
| $17,000 |
Par capital |
| 30,000 |
Boo capital |
| 40,000 |
Service revenue |
| 50,000 |
Supplies expense | 17,000 |
|
Utilities expense | 4,000 |
|
Salaries to partners | 18,000 |
|
Other miscellaneous expenses | 5,000 |
|
Total | $137,000 | $137,000 |
REQUIRED
1. Journalize the entries necessary to close the partnership books assuming that there is no agreement regarding profit distribution.
2. Prepare a statement of partnership capital assuming that the partnership agreement provides for monthly salary allowances of $800 and $1,000 for Par and Boo, respectively, and for the division of remaining profits in relation to average capital balances.
3. Prepare a profit distribution schedule for the Par and Boo partnership assuming monthly salary allowances of $800 and $1,000 for Par and Boo, respectively; interest allowances at a 12 percent annual rate on average capital balances; and remaining profits divided equally.
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