On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest$18,000 cash and merchandise inventory valued at $50,000. Capri invests certain businessassets at valuations agreed upon, transfers business liabilities, and contributes sufficientcash to bring his total capital to $120,000. Details regarding the book values of the busi-ness assets and liabilities, and the agreed valuations, follow:Capri's LedgerBalanceAgreed-UponBalanceAccounts Receivable$45,700$43,400Allowance for Doubtful Accounts3,2003,500Merchandise Inventory31,50028,90089,50019,00023,400EquipmentAccumulated Depreciation-EquipmentAccounts PayableNotes Payable (current)63,40023,40015,00015,000The partnership agreement includes the following provisions regarding the division ofnet income: interest of 10% on original investments, salary allowances of $36,000 (Lang)and $22,000 (Capri), and the remainder equally.Instructions1. Journalize the entries to record the investments of Lang and Capri in the partnershipaccounts.2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnershipof Lang and Capri.3. After adjustments at March 31, 20Y2, the end of the first full year of operations, therevenues were $598,000 and expenses were $480,000, for a net income of $118,000.(Continued) The drawing accounts have debit balances of $40,000 (Lang) and $30,000 (Capri).Journalize the entries to close the revenues and expenses and the drawing accountsat March 31, 20Y2.

Question
Asked Dec 19, 2019
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On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest
$18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business
assets at valuations agreed upon, transfers business liabilities, and contributes sufficient
cash to bring his total capital to $120,000. Details regarding the book values of the busi-
ness assets and liabilities, and the agreed valuations, follow:
Capri's Ledger
Balance
Agreed-Upon
Balance
Accounts Receivable
$45,700
$43,400
Allowance for Doubtful Accounts
3,200
3,500
Merchandise Inventory
31,500
28,900
89,500
19,000
23,400
Equipment
Accumulated Depreciation-Equipment
Accounts Payable
Notes Payable (current)
63,400
23,400
15,000
15,000
The partnership agreement includes the following provisions regarding the division of
net income: interest of 10% on original investments, salary allowances of $36,000 (Lang)
and $22,000 (Capri), and the remainder equally.
Instructions
1. Journalize the entries to record the investments of Lang and Capri in the partnership
accounts.
2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership
of Lang and Capri.
3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the
revenues were $598,000 and expenses were $480,000, for a net income of $118,000.
(Continued)
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On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring his total capital to $120,000. Details regarding the book values of the busi- ness assets and liabilities, and the agreed valuations, follow: Capri's Ledger Balance Agreed-Upon Balance Accounts Receivable $45,700 $43,400 Allowance for Doubtful Accounts 3,200 3,500 Merchandise Inventory 31,500 28,900 89,500 19,000 23,400 Equipment Accumulated Depreciation-Equipment Accounts Payable Notes Payable (current) 63,400 23,400 15,000 15,000 The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $36,000 (Lang) and $22,000 (Capri), and the remainder equally. Instructions 1. Journalize the entries to record the investments of Lang and Capri in the partnership accounts. 2. Prepare a balance sheet as of April 1, 20Y1, the date of formation of the partnership of Lang and Capri. 3. After adjustments at March 31, 20Y2, the end of the first full year of operations, the revenues were $598,000 and expenses were $480,000, for a net income of $118,000. (Continued)

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The drawing accounts have debit balances of $40,000 (Lang) and $30,000 (Capri).
Journalize the entries to close the revenues and expenses and the drawing accounts
at March 31, 20Y2.
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The drawing accounts have debit balances of $40,000 (Lang) and $30,000 (Capri). Journalize the entries to close the revenues and expenses and the drawing accounts at March 31, 20Y2.

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Expert Answer

Step 1

Requirement 1:

Prepare the journal entry for L and C’s investment in the partnership.

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Debit Credit Account Titles and Explanation Date ($) ($) Apr. 1 Cash $18,000 Merchandise Inventory $50,000 L, Capital $68,000 (To record the L's investment in the partnership) 1 Cash $26,200 Accounts Receivable $43,400 Merchandise Inventory $28,900 Equipment $63,400 Allowance for Doubtful Accounts $3,500 Accounts Payable $23,400 Notes Payable $15,000 C, Capital $120,000 To record the C's investment in the partnership)

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Step 2

Requirement 2:

Prepare the balance sheet on April 1, 20Y1, on the date of formation of partnership.

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LAND C Balance Sheet April 1, 20Y1 Assets Current assets: Cash (1) $44,200 Accounts receivable $43,400 Less allowance for doubtful accounts S39,900 $3,500 Merchandise inventory(2) $78900 Total current assets $163,000 Property, plant, and equipment: Equipment $63,400 Total assets $226,400 Liabilities Current liabilities: Accounts payable $23,400 Notes payable Total liabilities $15,000 $38,400 Partners' Equity L, capital C, capital S68,000 $120,000 Total partners' equity $188,000 Total liabilities and partners' equity $226,400

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Step 3

Working note:

...
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Total Cash = Cash contributed by L and C =$18,000+$26,200 =$44,200 (1) Total Merchandise inventory = Merchandise Inventory contributed by L and C = $28,900+ $50,000 =$78,900 (2) Hence, the assets total matches with total liabilities and partners' equity in the balance sheet, on the date of formation of partnership.

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