On February 1, 2014, Tessa Williams and Audrey To formed a partnership in the province of Ontario. Williams contributed $80,000 cash and to contribute land valued at $120,000 and a small building valued at $180,000. Also, the partnership assumed responsibility for To’s $130,000 long-term note payable associated with the land and building. The partners agreed to share profit or loss as follows: Williams is to receive an annual salary allowance of $90,000, both are to receive an annual interest allowance of 20% of their original capital investments, and any remaining profit or loss is to be shared equally. On November 20, 2014, Williams withdrew cash of $60,000 and to withdraw $45,000. After the adjusting entries and the closing entries to the revenue and expense accounts, the Income Summary account had a credit balance of $160,000.
1. Present General Journal entries to record the initial capital investments of the partners, their cash withdrawals, and the December 31 closing of the Income Summary and withdrawals accounts.
2. Determine the balances of the partners’ capital accounts as of the end of 2014.