Homework SourseOn March 1 20Y8 Eric Keene and Renee Wallace form a partners
On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $21,300 in cash and merchandise inventory valued at $56,390. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $59,940. 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 $22,330 (Keene) and $30,500 (Wallace), and the remainder equally.
*Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries.
CHART OF ACCOUNTSKeene and WallaceGeneral Ledger
Miscellaneous Expense
Journalize the entries on March 1 to record the investments of Keene and Wallacein the partnership accounts. Refer to the Chart of Accounts for exact wording of account titles.
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JOURNAL
ACCOUNTING EQUATION
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3. After adjustments at February 28, 20Y9, the end of the first full year of operations, the revenues were $303,250 and expenses were $212,900, for a net income of $90,350. The drawing accounts have debit balances of $27,850 (Keene) and $30,820 (Wallace). Journalizethe entries to close the revenues and expenses and the drawing accounts at February 28, 20Y9. Refer to the Chart of Accounts for exact wording of account titles. If required, round your answers to two decimal places.
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JOURNAL
ACCOUNTING EQUATION
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Closing Entries
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2. Prepare a balance sheet as of March 1, 20Y8, the date of formation of the partnership of Keene and Wallace. Refer to the Chart of Accounts and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Enter current assets in order of liquidity. “Less”, “Add”, or colons (:) will automatically appear if required.
Keene and Wallace
Balance Sheet
March 1, 20Y8
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Assets
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Liabilities
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Partners’ Equity
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| Wallace’s Ledger | Agreed-Upon | |
|---|---|---|
| Balance | Valuation | |
| Accounts Receivable | $18,470 | $17,510 |
| Allowance for Doubtful Accounts | 1,130 | 1,420 |
| Equipment | 83,500 | 54,650 |
| Accumulated Depreciation | 29,900 | – |
| Accounts Payable | 14,810 | 14,810 |
| Notes Payable (current) | 36,170 | 36,170 |
Solution
Solution:
1. Mar. 1
Cash......................................21,300
Merchandise Inventory .........56,390
Eric Keene, Capital.............................77,690
Cash .......................................40,180
Accounts Receivable ..............17,510
Equipment................................54,650
Allowance for Doubtful Accounts.....................1,420
Accounts Payable ...........................................14,810
Notes Payable .................................................36,170
Renee Wallace, Capital...................................59,940
2.
Assets
Current assets: Cash $ 61,480
Accounts receivable $ 17,510
Less allowance for doubtful accounts 1,420 16,090
Merchandise inventory 56,390
Total current assets $ 133,960
Plant assets: Equipment 54,650
Total assets $ 188,610
Liabilities
Current liabilities:
Accounts payable $ 14,810
Notes payable 36,170
Total liabilities $ 50,980
Partners\' Equity
Eric Keene, capital $ 77,690
Renee Wallace, capital 59,940
Total partners\' equity 137,630
Total liabilities and partners\' equity $ 188,610
3.
Feb. 28 Income Summary …………. 90,350
Eric Keene, Capital …………………41,977.5
Renee Wallace, Capital …………… 48,372.5
28 Eric Keene, Capital …… 27,850
Renee Wallace, Capital……30,820
Eric Keene, Drawing…………….….. 27,850
Renee Wallace, Drawing ……………30,820
Schedule: Keene Wallace
Total Interest allowance $ 7,769 $ 5,994 $ 13,763
Salary allowance 22,330 30,500 52,830
Remaining income 11,878.5 11,878.5 23,757
Net income $ 41,977.5 $48,372.5 $ 90,350
