Journalize the allocation of the loss from income summary

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Account for partner investments, allocating profits and losses to the partners

This exercise is related to the Lawlor Lawn Service situation started in Chapter 1. Lawlor has decided to start a pressure washing business with her buddy Tanya. This will be a separate business from Lawlor Lawn Service. Lawlor and Tanya will be partners in the pressure washing business. Lawlor will contribute cash of $1,000 and a pressure washing machine that cost Lawlor $1,800 but has current market value of only $1,500. Tanya will contribute supplies of $500 and a storage building that cost $2,000 but has current market value of $2,200. They form the LT Pressure Washing Company on March 1, 2013. Lawlor and Tanya agree to share profits and losses 4:3, respectively.

Requirements

1. Journalize the investment of both partners in the LT Pressure Washing Company on March 1, 2013.

2. The partnership recorded a loss of $700 for March, 2013. Journalize the allocation of the loss from Income summary.

3. What are the balances in Lawlor and Tanya's capital accounts on March 31? Prepare T-accounts to answer the question.

Reference no: EM13527516

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