Max Baer and Jimmy Choo Are Two Proprietors Who Decide

question 149

Essay

Max Baer and Jimmy Choo are two proprietors who decide to merge their businesses into a partnership on January 1, 2014. The assets each contributed to the partnership are as follows: During the year ended December 31, 2014, the business, Bear-Chew Pet Services, had revenues of $180,000, rent expenses of $12,000, depreciation expense of $2,500, and other operating expenses of $8,400. Other than depreciation expense, all revenues and expenses incurred by the business were for cash. As well, cash of $7,500 was collected on the accounts receivable, with the remainder of the accounts receivable written off. The partnership agreement specifies that Max and Jimmy will share the partnership profit equally. During the year, Max withdrew $40,000 for personal use, and Jimmy withdrew $28,000.
Instructions
a. Prepare the journal entry to record the two partners' contributions on January 1, 2014.
b. Prepare the partnership's income statement, statement of partners' equity, and balance sheet at December 31, 2014.

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