C and D had capital balances of $60,000 and $120,000 respectively on January 1 o

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

Explanation / Answer

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)

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