Vince Sharma and Klaus Warsteiner formed a partnership on January 1, 2020. The partners agreed to invest equal amounts of capital. Sharma invested his proprietorship’s assets and liabilities (all accounts have normal balances):

On January 1, Warsteiner invested cash in an amount equal to the current market value of Sharma’s partnership capital. The partners decided that Sharma would earn 70 percent of partnership profits because he would manage the business. Warsteiner agreed to accept 30 percent of profits. During the period ended December 31, 2020, the partnership earned $432,000. Warsteiner’s withdrawals were $128,000 and Sharma’s withdrawals were $172,800.

Required

1. Journalize the partners’ initial investments.

2. Prepare the partnership balance sheet immediately after its formation on January 1, 2020.

3. Calculate the partners’ Capital balances on December 31, 2020.

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Sharma's Current Market Book Value Value Accounts receivable. $24,000 $20,000 Inventory . Prepaid expenses. 86,000 62,000 13,000 12,000 Store equipment. 72,000 52,000 Accounts payable. 40,000 40,000