Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital con
ID: 2403208 • Letter: M
Question
Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $72,900, $283,500, and $453,600, respectively. They predict annual partnership net income of $481,500 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $82,400 to Mo, $61,800 to Lu, and $93,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb. 3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $481,500. Mo, Lu, and Barb withdraw $37,600, $51,600, and $67,600, respectively, at year-end. Also close the withdrawals accounts. a.Record the entry to close the income summary account assuming the partners agree to use plan(c) and net income is $481,500. b.Record the entry to close the partners' withdrawals accounts. (Mo, Lu, and Barb withdraw $37,600, $51,600, and $67,600, respectively, at year-end.)
Explanation / Answer
Working for Journal Entries-
Journal Entries-
Introduction of Capital-
Bank A/c Dr $ 810000
To M's Capital 72900
To L's Capital 283500
To B's Capital 453600
Partners Withdrawal Account-
M's Withdrawal Account
Journal Entry to Close the withdrawal Account
M's Withdrawal Account Dr 84750
To M's Capital Account 84750
L's Withdrawal Account
Journal Entry to Close the withdrawal Account
L's Withdrawal Account Dr 103870
To L's Capital Account 103870
M's Withdrawal Account
Journal Entry to Close the withdrawal Account
B's Withdrawal Account Dr 136080
To B's Capital Account 136080
Total profit $481500 Less- Salary to Partners $237200 Less- Interest of Inital Capital $81000 Balance Profit $163300 M's Capital (20%) 32660 L's Capital (40%) 65320 B's Capital (40%) 65320