Chapter 5
Partnerships
238
AP-5B (
4
)
Mathew, Henry and Tom formed a partnership to open a grocery store in 2016. Each partner
contributed $30,000 cash. In addition, Henry brought some furniture worth $3,000 and Tom
brought a vehicle worth $8,000. An independent appraiser determined the vehicle should be
valued at $7,000.
Required
a) During 2016, the business earned a net income of $90,000. The partners decided to divide
profit equally. Prepare a journal entry to close the income summary account at year-end.
Date
Account Title and Explanation
Debit
Credit
b) Assume instead that Mathew will receive 25% of the profit, Henry will receive 30% of the
profit and Tom will receive 45% of the profit. During the year the business made a loss of
$30,000. Prepare a journal entry to close the income summary account at year-end.
Date
Account Title and Explanation
Debit
Credit
