Question

C and D had capital balances of $60,000 and $120,000 respectively on January 1 of the current year. On May 8, C invested an additional $10,000 in the partnership. During the year, C and D withdrew $25,000 and $35,000 respectively. After closing all expense and revenue accounts at the end of the year, Income Summary has a credit balance of $90,000. The net income is divided in the ration of 2:3 after a salary of $40,000 to C.

Journalize the entries to close the income summary account and the drawing accounts.

Prepare the statement of owner’s equity for the current year

Answer 1

Journal entries

Income summary	$ 90,000
C's capital ($40,000+(50,000*2/5)		$ 60,000
D's capital		$ 30,000
(To close income summary account)
Withdrawals	$ 60,000
C's capital		$ 25,000
D's capital		$ 35,000
(To close drawings account)

	C	D
Opening balance	$    60,000	$ 120,000
Add: Additional capital invested	$    10,000	$               -
Less: Drawings	$ (25,000)	$ (35,000)
Add: Salary	$    40,000	$               -
Add: Net income	$    20,000	$    30,000
Closing balance	$ 105,000	$ 115,000