Reference no: EM132672921

Question - A) The partnership of Abel and Caine was formed on February 28, 2020. At that date the following assets were invested:

Abel Caine

Cash $120,000 $200,000

Merchandise -0- 320,000

Building -0- 840,000

Furniture and equipment 200,000 -0-

The building is subject to a mortgage loan of $280,000, which is to be assumed by the partnership.

Required: Prepare all journal entries necessary to record Caine's investment into the partnership.

(B) For 2020, reported net income before partner salaries was $50,000. Abel and Caine receive monthly salary payments from the partnership of $2,000 and $3,000, respectively. They agree that any remaining profits and losses after their salaries are shared 6:4.

Required: How much of the $50,000 net income should be allocated to each partner? Show your work.

(C) Using the information in (B), prepare closing entries to close out the partners' drawing accounts and the income summary account.