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The partnership agreement includes the following provisions regarding the division of net income: interest on original investments at 10%, salary allowances of$22,500 (Keene) and $30,400 (McKee), and the remainder equally.
On March 1, 2014, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $21,100 in cash and merchandise inventory valued at$55,900. McKee invests certain business assets at valuations agreed upon, transfers business liabilities, and contributes sufficient cash to bring her total capital to $60,000. Details regarding the book values of the business assets and liabilities, and the agreed valuations, follow:
|Allowance for Doubtful Accounts|
|Notes Payable (current)|
- Journalize the entries to record the investments of Keene and McKee in the partnership accounts.
- Prepare a balance sheet as of March 1, 2014, the date of formation of the partnership of Keene and McKee.
- After adjustments and the closing of revenue and expense accounts at February 28, 2015, the end of the first full year of operations, the income summary account has a credit balance of$90,000, and the drawing accounts have debit balances of $28,000 (Keene) and$30,400 (McKee). Journalize the entries to close the income summary account and the drawing accounts at February 28, 2015.
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