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Sharp and Townson had capital balances of $80,000 and $150,000, respectively on January 1, 2014 of...

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Accounting

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 (alreadyentered). 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 inthe 'Expenses' account. Sharp and Townson have agreed to split on a2:1 basis, respectively. (xx.xx%)

1. Journalize the entries to close the revenueand expenses and the drawing accounts.

2. Prepare the statement of partner's equityfor the current year.

Answer & Explanation Solved by verified expert
4.4 Ratings (926 Votes)

1.

Date Title Debit Credit
Dec-31 Revenue $ 500,000
Income summary $ 500,000
(To close revenue acount)
Dec-31 Income summary $ 380,000
Expenses $ 380,000
(To close expense account)
Dec-31 Income summary ($500,000-$380,000) $ 120,000
Partners capital - Sharp ($120,000*2/3) $    80,000
Partners capital - Townson ($120,000*1/3) $    40,000
(To close income summary)
Dec-31 Partners capital - Sharp $    35,000
Partners capital - Townson $    55,000
Withdrawals - Sharp $    35,000
Withdrawals - Townson $    55,000
(To close drawings account)

2.

statement of partner's equity
Sharp Townson
Beginning balance $    80,000 $   150,000
Add: Additional capital $    20,000
Add: Net income $    80,000 $     40,000
Less: Withdrawals $ (35,000) $   (55,000)
Ending balance $ 145,000 $   135,000

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