Question

Prepare the journal entry for each transaction and track each partner’s capital balance.

12/31/2014 - Ries and Bax each have a partner’s capital balance of $17,500. They split profits and losses equally. Royce is accepted as a 1/3 partner in RB&R Company after contributing $10,000 cash. The partners agree that a 10% interest allowance will be given on each partner’s beginning-year capital balance. In addition, Bax and Royce are to receive $5,250 salary allowances. The remainder of the income or loss is to be divided between Ries, Bax, and Royce in a 3:2:1 ratio.

12/31/2015 - The partnership’s income for the year is $60,000.

12/31/2016 - The partnership incurred losses of $34,000 for the year. The balance sheet shows $12,500 cash, $135,000 inventory, and $77,000 of accounts payable as of 12/31/16. After selling inventory and using all assets to pay off accounts payable at book value, there is $18,600 cash remaining. The partnership decides to liquidate. Negative capital balances will be covered by other partners.

Answer 1

Journal Entries

Date	Particulars	Debit ($)	Credit($)
12/31/2014	Cash A/c Dr. To Royce Capital A/c (Being New Partner Royceapital)	10000	10000
12/31/2015	Profit and loss Appropriation A/c Dr. To Interest on Capital A/c To Partners Salary A/c To Ries Capital A/c To Bax Capital A/c To Royce Capital A/C (Being Profit and Loss Appropriated Amongs the partners namely interest on capital, Salary and Profit and loss Division)	60000	4500 10500 22500 15000 7500
12/31/2016	Ries Capital A/c Dr. Bax Capital A/c Dr. Royce Capital A/c Dr. To Profit and Loss Appropriation A/c ( Being loss charged to all the partner in their profit and loss sharing ratio)	17000 11333 5667	34000
12/31/2016	Accounts Payable A/c Dr. Realisation A/c Dr. To Inventory A/c To Supense A/c (Being Accounts Payable and Inventory transferred to Realisation A/c)	77000 58500	135000 500
12/31/2016	Cash A/c Dr. To Realisation A/c (Being net cash Realised	6100	6100
12/31/2016	Ries Capital A/c Dr. Bax Capital A/c Dr. Royce Capital A/c Dr. To Realisation A/c ( Being Loss transferred to Partners Capital A/c)	26200 17467 8733	52400
12/31/2016	Cash A/c Dr. Ries Capital A/c (Being Negative capital balance made good by Ries)	1450	1450
12/31/2016	Bax Capital A/c Dr. Royce Capital A/c Dr. To Cash A/c (Being Bax And Royce given their share on liquidation)	10700 9350	20050