Liam and Katano formed a partnership to open a sushi restaurant by investing $95,000 and $105,000, respectively.
Question:
Liam and Katano formed a partnership to open a sushi restaurant by investing $95,000 and $105,000, respectively. They agreed to share profit based on an allocation to Liam of an annual salary allowance of $150,000, interest allowance to both Liam and Katano equal to 15% of their beginning-of-year capital balance, and any balance based on a 1:3 ratio, respectively. At the end of their first year, December 31, 2020, the Income Summary had a credit balance of $30,000. Liam withdrew $7,000 during the year and Katano $24,000.
Required
1. Prepare the entry to close the Income Summary on December 31, 2020.
2. Calculate the balance in each partner’s capital account at the end of their first year.
PartnershipA legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Step by Step Answer:
Fundamental Accounting Principles Volume II
ISBN: 978-1260305838
16th Canadian edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann