April and May formed a partnership on January 1, 2011. April contributed $180,000 cash and equipment with a market value of $80,000 with a loan note payable of $40,000. May's investment consisted of $60,000 in cash, $60,000; inventory, $40,000; all at market values. The partnership made a net income of $80,000 for 2011.
Required:
1. Prepare the journal entry to record the formation of the partnership on January 1, 2011
Debit Cash $180,000
Debit Equipment $80,000
Credit Note Payable $40,000
Credit April Capital $220,000
Debit Cash $60,000
Debit Inventory $40,000
Credit May Capital $100,000
2. Determine each partner's share of the net income for the year and prepare the journal entry necessary to close the books, assuming each of the following independent situations: (a) Income is divided based on the partners' failure to sign an agreement. (b) Income is divided based on partners allowed 10% of the original capital investments, with salaries to April of $30,000 and May of $20,000, and the remainder to be divided equally.