prepare a balance sheet as of august 1 2012 the date of formation of the partnership 554346

PR 12-1A Entries and balance sheet for partnership

On August 1, 2012, Wardell Cole and Marva Landers form a partnership. Cole agrees to invest $15,600 in cash and merchandise inventory valued at $62,400. Landers invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. 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 $22,500 (Cole) and $30,400 (Landers), and the remainder equally.

Instructions

1. Journalize the entries to record the investments of Cole and Landers in the partnership accounts.

2. Prepare a balance sheet as of August 1, 2012, the date of formation of the partnership of Cole and Landers.

3. After adjustments and the closing of revenue and expense accounts at July 31, 2013, the end of the first full year of operations, the income summary account has a credit balance of $100,500, and the drawing accounts have debit balances of $25,000 (Cole) and $30,400 (Landers). Journalize the entries to close the income summary account and the drawing accounts at July 31, 2013.