Question

On June 1, 2020, Jill Bow and Aisha Adams formed a partnership to open a gluten-free commercial bakery, contributing $283,000 cash and $366,000 of equipment, respectively. The partnership also assumed responsibility for a $43,000 note payable associated with the equipment. The partners agreed to share profits as follows: Bow is to receive an annual salary allowance of $153,000, both are to receive an annual Interest allowance of 10% of their original capital Investments, and any remaining profit or loss is to be shared 40/60 (to Bow and Adams, respectively). On November 20, 2020, Adams withdrew cash of $103,000. At year-end, May 31, 2021, the Income Summary account had a credit balance of $410,000. On June 1, 2021, Peter Williams Invested $123,000 and was admitted to the partnership for a 20% Interest In equity. Required: 1. Prepare journal entries for the following dates. a. June 1, 2020 View transaction list Journal entry worksheet Record the formation of partnership. Note: Enter debits before credits. Date General Journal Debit Credit June 01. 2020 Record entry Clear entry View general journal

Answer 1

Part 1

No.	Date	Account titles and explanation	Debit	Credit
a	June 1, 2020	Cash	283000
		Equipment	366000
		J. Bow, Capital		283000
		A. Adams, Capital		323000
		Notes Payable		43000
		To record formation of partnership
b	November 20, 2020	A. Adams, Withdrawals	103000
		Cash		103000
		To record withdrawal by partner.
c	May 31, 2021	Income summary	410000
		J. Bow, Capital		259860
		A. Adams, Capital		150140
		To record closing of net income to capital
d	June 1, 2021	Cash	123000
		J. Bow, Capital (207200-123000)*40%	33680
		A. Adams, Capital (207200-123000)*60%	50520
		P. Williams, Capital (1036000*20%)		207200
		To record the admission of new partner

	J. Bow	A. Adams	Total
Net income			410000
Salary allowance:
Bow	153000
Interest allowances:
Bow (10% on $283,000)	28300
Adams (10% on $323,000)		32300
Total salaries and interest allocation	181300	32300	213600
Balance of income to be allocated			196400
Balance allocated 40/60:
Bow (40% × $196400)	78560
Adams (60% × $196400)		117840
Total allocated 40/60			(196400)
Balance of income			0
Shares of the partners	259860	150140	410000

Total equity prior to admission of new partner = (283000+259860)+(323000-103000+150140) = 913000

Total equity after admission of new partner = 913000+123000 = 1036000

Part 2

J. Bow, Capital (283000+259860-33680)	$509180
A. Adams, Capital (323000-103000+150140-50520)	$319620
P. Williams, Capital	$207200