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Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries LO P2

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Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $71,100, $276,500, and $442,400, respectively. They predict annual partnership net income of $471,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $81,600 to Mo, $61,200 to Lu, and $92,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.

rev: 09_28_2017_QC_CS-102797

Problem 12-4A Part 3

3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $471,000. Mo, Lu, and Barb withdraw $36,400, $50,400, and $66,400, respectively, at year-end. Also close the withdrawals accounts.

Answer 1

3. Journal entry
Date	Particulars	L.F	Amount ($)	Amount ($)
Dec-31	Income summary		4,71,000
	Mo Capital			1,20,150
	Lu Capital			1,51,730
	Barb capital			1,99,120
	(To Close the Income summary account )
	Mo Capital		36,400
	Lu Capital		50,400
	Barb capital		66,400
	Mo withdrawal			36,400
	Lu withdrawal			50,400
	Barb Withdrawal			66,400
	(To Close the withdrawals account )

Working note
	Mo	Lu	Barb	Total
Initial Investment	71,100	2,76,500	4,42,400	7,90,000
Net Income
Salary allowances	81,600	61,200	92,000	2,34,800
Interest allowances	7,110	27,650	44,240	79,000
Balance allocated (157,200 in 20:40:40)	31,440	62,880	62,880	1,57,200
Total Net Income(Given)	1,20,150	1,51,730	1,99,120	4,71,000