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On March 1, 2011, Abbey and Dames formed a partnership. Abbey contributed $88,000 cash and Dames contributed land valued at $70,000 and a building valued at $100,000. The partnership also assumed responsibility for Dames’s $80,000 long term note payable associated with the land and building. The partners agreed to share income as follows: Abbey is to receive an annual salary allowance of $30,000, both are to receive an annual interest allowance of 10% of their beginning year capital investment, and any remaining income or loss is to be shared equally. On October 20, 2011, Abbey withdrew $32,000 cash and Dames withdrew $25,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at December 31, 2011, the Income Summary account had a credit balance of $79,000. |
| 1(a) | Prepare journal entries to record the partners’ initial capital investments. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| Mar. 1, 2011 | (Click to select)Long term notes payableAbbey, CapitalBuildingAccounts payableCash Land Dames, Capital Prepaid income | ||
| (Click to select)Cash Dames, Capital Prepaid incomeBuildingLong term notes payableAbbey, Capital LandAccounts payable | |||
| (Click to select)Abbey, Capital Land Dames, CapitalBuildingLong term notes payable Prepaid incomeAccounts payableCash | |||
| (Click to select)Building Prepaid incomeLong term notes payableAbbey, CapitalDames, CapitalAccounts payableLandCash | |||
| (Click to select)LandAbbey, CapitalCashLong term notes payableDames, Capital Prepaid incomeBuildingAccounts payable | |||
| (Click to select)LandCashBuildingAbbey, Capital Prepaid incomeAccounts payableLong term notes payableDames, Capital | |||
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| 1(b) | Prepare journal entries to record their cash withdrawals. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| Oct. 20, 2011 | (Click to select)Supplies payableBuildingCash Prepaid incomeLandDames, WithdrawalsAbbey, WithdrawalsAbbey, Capital | ||
| (Click to select)Abbey, CapitalSupplies payableDames, WithdrawalsLandAbbey, Withdrawals Prepaid incomeCashBuilding | |||
| (Click to select)Supplies payablePrepaid incomeLandBuildingCashAbbey, WithdrawalsDames, WithdrawalsAbbey, Capital | |||
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| 1(c) | Prepare journal entries to record the December 31 closing of both the Withdrawals and Income Summary accounts. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| Dec. 31, 2011 | (Click to select)Supplies payable CashAccounts receivable Abbey, WithdrawalsDames, WithdrawalsDames, Capital Prepaid incomeAbbey, Capital | ||
| (Click to select)Abbey, WithdrawalsDames, WithdrawalsDames, CapitalAbbey, CapitalSupplies payableAccounts receivable Cash Prepaid income | |||
| (Click to select) CashAccounts receivableAbbey, WithdrawalsDames, CapitalAbbey, CapitalSupplies payable Prepaid incomeDames, Withdrawals | |||
| (Click to select)Abbey, CapitalDames, WithdrawalsDames, Capital Prepaid incomeAccounts receivableSupplies payableAbbey, Withdrawals Cash | |||
| (Click to select)Dames, CapitalPrepaid incomeAbbey, CapitalDames, WithdrawalsIncome summaryAbbey, WithdrawalsCashSales revenue | |||
| (Click to select)Prepaid incomeCashAbbey, CapitalDames, WithdrawalsSales revenueAbbey, WithdrawalsIncome summaryDames, Capital | |||
| (Click to select)Dames, CapitalPrepaid incomeDames, WithdrawalsIncome summaryAbbey, WithdrawalsCashAbbey, CapitalSales revenue | |||
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| 2. |
Determine the balances of the partners’ capital accounts as of December 31, 2011. (Amounts to be deducted should be indicated with a minus sign. Omit the “$” sign in your response.) |
| Capital account balances | Abbey | Dames |
| Initial investment | $ | $ |
| Withdrawals | ||
| Share of income | ||
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| Ending balances | $ | $ |
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