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Prepare general journal entries to record initial capital

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Reference no: EM132763738

On 1 January 2020, P and Q formed a partnership by making the following capital contributions:

P $75,000 in cash

Q $150,000 in equipment

  • The profit of $200,000 for the year ended 31 December 2020 is to be allocated assuming a $20,000 salary to P and a $15,000 salary to Q. The partners will also receive an interest allowance of 10% on their capital investments. Any remaining profit is to be shared equally.

Required:

Problem 1: Prepare the general journal entries to record the following: (Explanations not required)

(a) initial capital investments

(b) allocation of profit to the partners

(c) to close the partners' Drawings accounts assuming that P withdrew $40,000 and Q withdrew $50,000.

Reference no: EM132763738

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