Question

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.xx%) 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.

Answer 1

Journal Entries
Date	Description of Account	Debit	Credit
Dec 31 2014	Revenue Account	500,000
	Income Summary		50,000
(Being closing entry for revenue account)
Dec 31 2014	Income Summary	380,000
	Expense Account		380,000
(Being closing entry for revenue account)
Dec 31 2014	Income Summary
	Sharp's Equity		80,000
	Townson's Equity		40,000
	Income Summary	120,000
(Being profit is divided into 2:1 ratio to Sharp and Townson respectively)

Statement of Sharp's Equity
For the period 01st January 2014 to 31st Dec 2014
Date	Description	Amount
Jan 1 2014	Opening Balance	80,000
May 8 2014	Cash Contribution	20,000
Dec 31 2014	Drawing Account	(35,000)
Dec 31 2014	Profit from Income Summary	80,000
Dec 31 2014	Clsoing Balance C/fd	145,000

Statement of Townson's Equity
For the period 01st January 2014 to 31st Dec 2014
Date	Description of Account	Debit
Jan 1 2014	Opening Balance	80,000
Dec 31 2014	Drawing Account	(55,000)
Dec 31 2014	Profit from Income Summary	40,000
Dec 31 2014	Clsoing Balance C/fd	65,000