May 1, Fine and Max formed a partnership. Fine contributed cash of $90,000 and e
ID: 2458718 • Letter: M
Question
May 1, Fine and Max formed a partnership. Fine contributed cash of $90,000 and equipment at $152,000. Max contributed land valued at $120,000 and a building valued at $250,000. partnership also assumed responsibility for Max's $110,000 long-term note payable with the land and building. The partners agreed to share income as follows: Fine is to a salary allowance of $38,000, both are to receive an annual interest allowance of 8% of beginning-year capital investments, and any remaining income or loss is to be shared During the year, Fine withdrew $40,000 and Max withdrew $42,000 cash. After the g and closing entries are made to the revenue and expense accounts at the end of the end of the Income Summary account had a credit balance of $140,000. journal entries to record the partners' initial capital investments, their cash and closing of both the Withdrawals and Income Summary accounts.Explanation / Answer
Journal entries
No.
Accounts and explanations
P.ref
Debit
Credit
a.
Cash
$90,000
Equipment
$152,000
Land
$120,000
Building
$250,000
M’s long-term note payable
$110,000
F’s capital account
$242,000
M’s capital account
$260,000
To record partners’ initial capital investments.
b.
F’s drawings
$40,000
M’s drawings
$42,000
Cash
$82,000
To record drawings of partners
c.
F’s capital account
$40,000
M’s capital account
$42,000
F’s drawings
$40,000
M’s drawings
$42,000
To record the closing entry of drawings.
Income summary account
$140,000
F’s salary allowance
$38,000
F’s interest allowance (242000×8%)
$19,360
M’s interest allowance (260000×8%)
$20,800
F’s remaining profit (61840 / 2)
$30,920
M’s remaining profit
$30,920
To record the closing entry in the income summary account.
No.
Accounts and explanations
P.ref
Debit
Credit
a.
Cash
$90,000
Equipment
$152,000
Land
$120,000
Building
$250,000
M’s long-term note payable
$110,000
F’s capital account
$242,000
M’s capital account
$260,000
To record partners’ initial capital investments.
b.
F’s drawings
$40,000
M’s drawings
$42,000
Cash
$82,000
To record drawings of partners
c.
F’s capital account
$40,000
M’s capital account
$42,000
F’s drawings
$40,000
M’s drawings
$42,000
To record the closing entry of drawings.
Income summary account
$140,000
F’s salary allowance
$38,000
F’s interest allowance (242000×8%)
$19,360
M’s interest allowance (260000×8%)
$20,800
F’s remaining profit (61840 / 2)
$30,920
M’s remaining profit
$30,920
To record the closing entry in the income summary account.