Penny and Lane formed a partnership on 1 July 2015 with initial capital balances of $200 000

Question:

Penny and Lane formed a partnership on 1 July 2015 with initial capital balances of $200 000 and $220 000 respectively. For the year ended 30 June 2016, the Profit or Loss Summary account dis¬closed a final credit balance of $180 000.

Required

A. Prepare the closing entry to transfer the profit disclosed in the Profit or Loss Summary account to the Profit Distribution account under method 1 and method 2.

B. Prepare the closing general journal entry to distribute the profit to Penny and Lane, assuming they have agreed to share profits in the ratio of 3:2.

C. Show how the partners’ equity accounts would appear in the balance sheet of the partnership at 30 June 2016.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... Partnership
A 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...

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