Reference no: EM13518772

On March 1, 2014, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $21,100 in cash and merchandise inventory valued at $55,900. McKee invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:

The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of $22,500 (Keene) and $30,400 (McKee), and the remainder equally.

1. Journalize the entries to record the investments of Keene and McKee in the partnership accounts.

Journal
Date	Details	DR	Cr
	Accounts Receivable	18000
	Equipment	54900
	Allowance for doubtful account		1500
	Accounts Payable		15000
	Note Payable		36000
	Keene Capital		20400

2. Prepare a balance sheet as of March 1, 2014, the date of formation of the partnership of Keene and McKee.

Keene and McKee Balance Sheet March 1, 2014
ASSETS		LIABILITIES
Cash	21000	Accounts Payable	15,000
		Note Payable	36,000
Accounts Receivable	18,900	Total Liabilities	51000
		OWNER'S EQUITY
Equipment	54,900	Eric keene
		Abigail Mckee	60000
Total Assets	73,800	TOTAL LIABILTIES &EQUITY	111000

3. After adjustments and the closing of revenue and expense accounts at February 28, 2015, the end of the first full year of operations, the income summary account has a credit balance of $90,000, and the drawing accounts have debit balances of $28,000 (Keene) and $30,400 (McKee). Journalize the entries to close the income summary account and the drawing accounts at February 28, 2015.