College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Question
Chapter 19, Problem 7SPA
1.
To determine
Prepare the lower portion of income statement of the
1.
Expert Solution
Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement. In partnership, the division is often recorded in the lower portion of the income statement.
Prepare lower portion of income statement:
| Partnership R and B, CPAs | |||
| Income Statement (Partial) | |||
| For Year Ended December 31 | |||
| Net income | $135,000 | ||
| Allocation of net income: | Partner R | Partner B | Total |
| Salary allowances | $65,000 | $35,000 | $100,000 |
| Interest allowances | $5,500 | $4,500 | $10,000 |
| Remaining income | $11,250 | $13,750 | $25,000 |
| Allocation of net income | $81,750 | $53,250 | $135,000 |
Table (1)
2.
To determine
Prepare a statement of partners’ equity for the year ended December 31 and partners’ equity section of the balance sheet on that date.
2.
Expert Solution
Explanation of Solution
Statement of Partners’ equity: This statement reports the equity of each partner and summarizes the division of net income for the year.
Statement of partners ‘equity is prepared as follows:
| Partnership R and B, CPAs | |||
| Statement of Partners’ Equity | |||
| For Year Ended December 31 | |||
| Person R | Person B | Total | |
| Capital, January 1 | $55,000 | $45,000 | $100,000 |
| Net income for the year | $81,750 | $53,250 | $135,000 |
| $136,750 | $98,250 | $235,000 | |
| Withdrawals (salary & interest) | $70,500 | $39,500 | $110,000 |
| Capital, December 31 | $66,250 | $58,750 | $125,000 |
Table (2)
Prepare partners’ equity section of the balance sheet on that date:
| Partnership R and B, CPAs | ||
| Balance Sheet (Partial) | ||
| December 31 | ||
| Partners’ Equity | ||
| Partner R, Capital | $66,250 | |
| Partner B, Capital | $58,750 | |
| Total partners’ equity | $125,000 | |
Table (3)
3.
To determine
Prepare closing entries for the partnership as of December 31.
3.
Expert Solution
Explanation of Solution
Closing entries:
Closing entries are those
Prepare closing entries:
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Revenues | $215,000 | |
| Income Summary | $215,000 | ||
| ( To close all revenues to income summary) |
Table (4)
- Revenue is a component of partners’ equity and it is decreased. Therefore, debit revenue account by $215,000.
- Income summary is a component of partners’ equity and it is increased. Therefore, credit income summary account by $215,000.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Income Summary | $80,000 | |
| Expenses | $80,000 | ||
| ( To close all expenses to income summary) |
Table (5)
- Income summary is a component of partners’ equity and it is decreased. Therefore, debit income summary account by $80,000.
- Revenue is a component of partners’ equity and it is increased. Therefore, credit revenue account by $80,000.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Income Summary | $135,000 | |
| Partner R, Capital | $81,750 | ||
| Partner S, Capital | $53,250 | ||
| ( To close income summary by allocating each partners’ share of net income or net loss to the individual capital account) |
Table (6)
- Income summary is a component of partners’ equity and it is decreased. Therefore, debit income summary account by $135,000.
- Partner R, Capital is a component of partners’ equity and it is increased. Therefore, credit Partner R, Capital account by $81,750.
- Partner S, Capital is a component of partners’ equity and it is increased. Therefore, credit Partner S, Capital account by $53,250.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Partner R, Capital | $70,500 | |
| Partner R, Drawing | $70,500 | ||
| ( To close each partners’ drawing account to the individual capital accounts) |
Table (7)
- Partner R, Capital is a component of partners’ equity and it is decreased. Therefore, debit Partner R, Capital account by $70,500.
- Partner R, Drawing is a component of partners’ equity and it is increased. Therefore, credit Partner R, Drawing account by $70,500.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Partner B, Capital | $39,500 | |
| Partner B, Drawing | $39,500 | ||
| ( To close each partners’ drawing account to the individual capital accounts) |
Table (8)
- Partner B, Capital is a component of partners’ equity and it is decreased. Therefore, debit Partner B, Capital account by $39,500.
- Partner B, Drawing is a component of partners’ equity and it is increased. Therefore, credit Partner B, Drawing account by $39,500.
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Preparing Partial Financial Statements and Closing Entries
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Prepare the lower portion of the income statement of the partnership for the year ended December 31, 20--, showing the division of the partnership net income for the year.
2.
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3.
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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
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BALANCE OF $90,000 THAT SHARP AND TOWNSON HAVE
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Chapter 19 Solutions
College Accounting, Chapters 1-27
Ch. 19 - Prob. 1TFCh. 19 - Prob. 2TFCh. 19 - Prob. 3TFCh. 19 - Prob. 4TFCh. 19 - Prob. 5TFCh. 19 - Prob. 1MCCh. 19 - Prob. 2MCCh. 19 - Prob. 3MCCh. 19 - Prob. 4MCCh. 19 - Prob. 5MC
Ch. 19 - Prob. 1CECh. 19 - Prob. 2CECh. 19 - Prob. 3CECh. 19 - Prob. 4CECh. 19 - Prob. 5CECh. 19 - Prob. 1RQCh. 19 - Prob. 2RQCh. 19 - Prob. 3RQCh. 19 - Prob. 4RQCh. 19 - Prob. 5RQCh. 19 - Prob. 6RQCh. 19 - Prob. 7RQCh. 19 - Prob. 8RQCh. 19 - Prob. 9RQCh. 19 - Prob. 1SEACh. 19 - Prob. 2SEACh. 19 - Prob. 3SEACh. 19 - Prob. 4SEACh. 19 - ENTRIES: PARTNERSHIP LIQUIDATION On liquidation of...Ch. 19 - Prob. 6SPACh. 19 - Prob. 7SPACh. 19 - Prob. 8SPACh. 19 - Prob. 9SPACh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1SEBCh. 19 - Prob. 2SEBCh. 19 - Prob. 3SEBCh. 19 - Prob. 4SEBCh. 19 - Prob. 5SEBCh. 19 - Prob. 6SPBCh. 19 - Prob. 7SPBCh. 19 - ENTRIES FOR DISSOLUTION OF PARTNERSHIP Cummings...Ch. 19 - Prob. 9SPBCh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1MYWCh. 19 - Prob. 1ECCh. 19 - Prob. 1MPCh. 19 - Prob. 1CPCh. 19 - Prob. 1COP
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