Question

With the following information below, prepare the pre-closing and closing journal entries for Smith, Jacob, & Frtiz Partnership. Additional Information: Smith will be allotted 50% of all profits and losses because of previous business experience. Jacob and Fritz have agreed in the articles of partnership to split the remaining 50%. The articles also state that each partner can withdraw $15,000 cash annually. Lastly, net income for the year totals $120,000. Directions Create the journal entries for the following: On December 15th, each partner agrees to draw down $15,000 cash as a payment for their yearly ownership On December 31st the following accounts must be closed. Drawing accounts, Revenue, Expenses, and Income Summary. Balances for Revenues and Expenses: Service Revenue $200,000 Salary Expense 60,000 Interest Expense 20,000

Answer 1

Solution:

Journal Entries In the Books of Partnership firm

15. Dec     Drawings Account               Dr.              $45,000

                      To Smith's Capital Account                                       $15,000

                      To Jacob's Capital Account                                       $15,000

                      To Frtiz's Capital Account                                         $15,000

                (Being Drawings withdrew by each partner)

31. Dec     Service Revenue Account              Dr               $200,000

                       To Profit and Loss Account                                    $200,000

                 (Being Income charged to P&L A/C)

31. Dec     Profit and Loss Account                Dr               $60,000

                       To Salary Account                                               $ 60,000

                 (Being Salaries charged to P&L A/C)

31. Dec     Profit and Loss Account                Dr               $20,000

                       To Interest Expense Account                                 $20,000

                 (Being Interest expense charged to P&L A/C)

31. Dec     Profit and Loss Account                Dr              $120,000

                       To Smith's Capital Account                                    $60,000

                       To Jacob's Capital Account                                    $30,000

                       To Frtiz's Capital Account                                      $30,000

                 (Being Profit Distributed among partners)