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Record the journal entry to establish the partnership

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Reference no: EM132477618

2014

February 1 - Tracy and Mask decide to start up a partnership. Tracy brings in $10,000 cash and equipment costing $60,000, with $17,000 in the accumulated depreciation account. The fair market value of the equipment is $37,000. Mask brings $54,000 in cash. They agree to an income ratio of 5:4.

December 31 - The business records a net income of $24,000, and Tracy has a debit balance of $16,000 in his drawings account.

Question a) Record the journal entry to establish the partnership.

Question b) Record the entry to allocate the net income to the partners' capital accounts.

2015

January 1 - Davis joins the partnership by contributing $46,000 in cash. A new partnership agreement is drawn up. Tracy, Mask and Davis agree to salaries of $5,000 for each partner and a 5:4:3 income ratio.

December 31 - The business recorded a net income of $30,000. Tracy had drawings of $20,000and Mask had drawings of $4,000.

Question a) Record the entry to admit the new partner into the business.

Question b) Record the entry to allocate the net income to the partners' capital accounts.

Reference no: EM132477618

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