Lincoln and Rafferty formed a partnership on March 15, 2018. The partners agreed to contribute equal amounts

Question:

Lincoln and Rafferty formed a partnership on March 15, 2018. The partners agreed to contribute equal amounts of capital. Lincoln contributed her sole proprietorship's assets and liabilities (credit balances in parentheses) as follows:

Lincoln's Business Book Value Current Market Value Accounts Receivable $ 12,200 $ 10,500 Merchandise Inventory 42,000 35,000 Prepaid Expenses 3,500 2,800 Store Equipment, Net 42,000 23,000 Accounts Payable (26,000) (26,000)

On March 15, Rafferty contributed cash in an amount equal to the current market value of Lincoln's partnership capital. The partners decided that Lincoln will earn 60% of partnership profits because she will manage the business. Rafferty agreed to accept 40% of the profits. During the period ended December 31, the partnership earned net income of $72,000. Lincoln's withdrawals were $36,000, and Rafferty's withdrawals totaled $26,000.

Requirements
1. Journalize the partners' initial contributions.
2. Prepare the partnership balance sheet immediately after its formation on March 15, 2018.
3. Journalize the closing of the Income Summary and partner Withdrawal accounts on December 31, 2018?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...