Rosie Wilsman and Rosa Escobedo own The Spring Flower Shop. The partnership agreement provides that Wilsman can withdraw $5,000 a month and Escobedo $4,500 a month in anticipation of profits. The withdrawals, which are not considered to be salaries, were made each month. Net income and net losses are to be allocated 40 percent to Wilsman and 60 percent to Escobedo. For the year ended December 31, 2016, the partnership earned a net income of $150,000.
Instructions
1. Prepare general journal entries to:
a. Close the Income Summary account.
b. Close the partners' drawing accounts.
2. Assume that there was a net loss of $50,000 for the year instead of a profit of $150,000. Give the general journal entries to:
a. Close the Income Summary account.
b. Close the partners' drawing accounts.
Analyze: Assume the business earned net income of $150,000. If 2016 was the first year of operation, what balance should be reflected for the Rosie Wilsman, Capital account at the end of the year if Wilsman's beginning capital was $110,000?