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    Account for partner investments and distribution

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    Lorena Lally and Allie Raras formed a partnership on March 15. The partners
    agreed to invest equal amounts of capital. Lally invested her proprietorship's assets
    and liabilities (credit balances in parentheses). See the table that follows.

    Lally's Current
    Book Values Market Values
    Accounts receivable......................... $12,300 $10,600
    Inventory......................................... 47,000 38,000
    Prepaid expenses ............................. 3,600 3,400
    Store equipment .............................. 41,000 28,000
    Accounts payable ............................ (24,000) (24,000)
    On March 15, Raras invested 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 drawings were $42,000, and Raras 's drawings totaled $22,000.

    Requirements
    1. Journalize the partners' initial investments.
    2. Prepare the partnership balance sheet immediately after its formation on March 15.
    3. Journalize the closing of the Income summary and partner Drawing accounts on
    December 31.

    © BrainMass Inc. brainmass.com March 5, 2021, 1:35 am ad1c9bdddf
    https://brainmass.com/business/partners-equity/account-partner-investments-distribution-600215

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    Solution Summary

    This posting demonstrate the journal entry to record an initial investment into a partnership, the allocation of profit and losses according to agreed upon ratio, distribution of cash from partnership, and their impact on partner's capital accounts, respectively.

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