Abby Lally and Laura Russo formed a on March 15, 2016. The partners agreed to contribute equal amounts of capital. Lally contributed her sole proprietorship’s assets and liabilities (credit balances in parentheses) as follows:
On March 15, Russo contributed cash in an amount equal to the current market value of Lally’s capital. The partners decided that Lally will earn 70% of profits because she will manage the business. Russo agreed to accept 30% of the profits. During the period ended December 31, the earned net income of $77,000. Lally’s withdrawals were $47,000, and Russo’s withdrawals totaled $23,000.
Requirements
1. Journalize the partners’ initial contributions.
2. Prepare the immediately after its formation on March 15, 2016.
3. Journalize the closing of the Income Summary and partner Withdrawal accounts on December 31, 2016.
