Sharp and Townson had capital balances of $60,000 and $120,000 respectively on J

Question

Sharp and Townson had capital balances of $60,000 and $120,000 respectively on January 1 of the current year. On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson withdrew $25,000 and $45,000 respectively. After closing all expense and revenue accounts at the end of the year, Income Summary has a credit balance of $90,000, that Sharp and Townson have agreed to split on a 2:1 basis, respectively.
(a) Journalize the entries to close the income summary account and the drawing accounts.
(b) Prepare the statement of owner's equity for the current year.

Explanation / Answer

Hi, Please find the answers as follows: Part A: Income Summary Journal Entry: Income Summary Dr. 90000 Sharp Capital Cr. 60000 Townson Capital Cr. 30000 Drawing Accounts Journal Entry Sharp Capital Dr. 25000 Townson Capital Dr. 45000 Sharp Drawing Cr. 25000 Townson Drawing Cr. 45000 Part B: Statement of Owner's Equity Sharp Opening Capital = 60000 Add Additional Investment made during the year = 10000 Add Net Income = 60000 Less Withdrawals = 25000 Closing Capital = 105000 Townson Opening Capital = 120000 Add Additional Investment made during the year = 0 Add Net Income = 30000 Less Withdrawals = 45000 Closing Capital = 105000 Total Opening Capital = 180000 Add Additional Investment made during the year = 10000 Add Net Income = 90000 Less Withdrawals = 70000 Closing Capital = 210000 Thanks.

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