Reference no: EM131817095
Tom and Julie formed a management consulting partnership on January 1, 2014. The fair value of the net assets invested by each partner follows:
Tom Julie
Cash $13,000 $12,000
Accounts receivable 8,000 6,000
Office supplies 2,000 800
Office equipment 30,000 -
Land - 30,000
Accounts payable 2,000 5,000
Mortgage payable - 18,800
During the year, Tom withdrew $15,000 and Julie withdrew $12,000 in anticipation of operating profits. Net profit for 2014 was $50,000, which is to be allocated based on the original net capital investment.
Required:
A. Prepare journal entries to:
1. Record the initial investment in the partnership.
2. Record the withdrawals.
3. Close the Income Summary and Drawing accounts.
B. Prepare a statement of changes in partners' capital for the year ended December 31, 2014.