Question

200 K38 - X fx AA BC P12 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.30%) 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. Scoring Rubric Total points Journal entries Simt of PS Ety S's Under scores Headings Number formats Other Total points 200 200 Rename Lname, Frame Stmt PExis Submit 27th Edition Ch 12: Pages 590-591 Did you review the Practice problem and watch the video? 12 P12 Closing 34 and St Partner Equity 200pts 202 XXg 1. Journalize these transactions: (Proper format w explanations.) General Journal . Page 2 Description PR DYO ö Exercise AD10

Answer 1

Answer 1.

We will record journal entries with a brief explanation on each entry.

May 8, Sharp invested an additional $10,000 in the partnership.

This is an increase of Sharp's invested capital in the partnership. We will assume that he invests in cash.

Account	Debit	Credit
Cash	20,000
Sharp, Capital		20,000

During the year, Sharp and Townson withdrew $ 35,000 and $ 55,000

A withdrawal in their capital accounts will be a debit to drawing account. It is a contra capital account and we will create a debit entry on the withdrawal and credit to cash.

Account	Debit	Credit
Sharp, Drawing	35,000
Townson, Drawing	55,000
Cash		90,000

After closing all expense and revenue accounts at the end of the year, credit balance of $500,000 & $380000, which Sharp and Townson have agreed to split on a 2:1 basis. After adjustment Revenue – Expenses = Balance (500000-380000=120000).

Partnership agreement on profit and loss varies from partners with their consent. In this case, partners agreed for 2:1 share, Meaning, Sharp will get 2/3 of the profit and loss and Townson will get 1/3 share, respectively.

Account	Debit	Credit
Income and Expense Summary	1,20,000
Townson, Capital (1,20,000 x 1/3)		40,000
Sharp, Capital (1,20,000 x 2/3)		80,000

2.

b
Partner's Equity for the current Year
Sharp and Townson
Statement of Owner's Equity
For the Year Ended 2014
			Sharp		Townson		Total
Capital, January 1			$80,000.00		$1,50,000.00		$2,30,000.00
			$0.00		$0.00		$0.00
Additional Investment (During the year)			$20,000.00		$0.00		$20,000.00
			$1,00,000.00		$1,50,000.00		$2,50,000.00
Net Income for the year			$40,000.00		$80,000.00		$1,20,000.00
			$1,40,000.00		$2,30,000.00		$3,70,000.00
Withdraw during the year			$35,000.00		$55,000.00		$90,000.00
			$1,05,000.00		$1,75,000.00		$2,80,000.00
Capital, December 31			$1,05,000.00		$1,75,000.00		$2,80,000.00