Question

Sharp and Townson had capital balances of $80,000 and $150,000, respectively on January 1, 2014 of the current year. On May 8, Sharp invested an additional $20,000 in the partnership (already entered). During the year, Sharp and Townson withdrew $35,000 and $55,000, respectively (Already entered). At the end of the year, there was $500,000 balance in the 'Revenue' account and $380,000 in the 'Expenses' account. Sharp and Townson have agreed to split on a 2:1 basis, respectively. (xx.xx%)

1. Journalize the entries to close the revenue and expenses and the drawing accounts.

2. Prepare the statement of partner's equity for the current year.

Answer 1

1.

Date	Title	Debit	Credit
Dec-31	Revenue	$ 500,000
	Income summary		$ 500,000
	(To close revenue acount)
Dec-31	Income summary	$ 380,000
	Expenses		$ 380,000
	(To close expense account)
Dec-31	Income summary ($500,000-$380,000)	$ 120,000
	Partners capital - Sharp ($120,000*2/3)		$    80,000
	Partners capital - Townson ($120,000*1/3)		$    40,000
	(To close income summary)
Dec-31	Partners capital - Sharp	$    35,000
	Partners capital - Townson	$    55,000
	Withdrawals - Sharp		$    35,000
	Withdrawals - Townson		$    55,000
	(To close drawings account)

2.

statement of partner's equity
	Sharp	Townson
Beginning balance	$    80,000	$   150,000
Add: Additional capital	$    20,000
Add: Net income	$    80,000	$     40,000
Less: Withdrawals	$ (35,000)	$   (55,000)
Ending balance	$ 145,000	$   135,000

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