Business, 23.08.2021 20:20 patrickgonzalezjr13
P12-26A Accounting for partner contributions, allocating profits and losses to the partners, preparing partnership financial statements
Lorena Lally and Allie Raras formed a partnership on March 15, 2014. The partners agreed to contribute equal amounts of capital. Lally contributed her sole proprietorship’s assets and liabilities (credit balances in parentheses) as follows: ( Lally, Capital $56,000)
Lally’s Business
Book Value Current Market Value
Accounts Receivable $ 12,300 $10,600
Merchandise Inventory 47,000 38,000
Prepaid Expenses 3,600 3,400
Store Equipment, Net 41,000 28,000
Accounts Payable (24,000) (24,000)
On March 15, Raras contributed cash in an amount equal to the current market value of Lally’s partnership capital. The partners decided that Lally will earn 70% of partnership profits because she will manage the business. Raras agreed to accept 30% of the profits. During the period ended December 31, the partnership earned net income of $74,000. Lally’s withdrawals were $42,000 and Raras withdrawals totaled $22,000.
Requirements
1. Journalize the partners’ initial contributions.
2. Prepare the partnership balance sheet immediately after its formation on March 15, 2014.
3. Journalize the closing of the Income Summary and partner Withdrawal ac-counts on December 31, 2014.
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P12-26A Accounting for partner contributions, allocating profits and losses to the partners, prepari...
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