Chapter 5
Partnerships
239
c) Assume instead that profits will be divided based on each partner’s capital contribution.
During the year, the business made a net income of $60,000. Prepare a journal entry to
close the income summary account at year-end.
Date
Account Title and Explanation
Debit
Credit
AP-6B (
4
)
Chloe, Chen and Yang are in partnership. According to the partnership agreement, Chloe
and Chen will receive a salary of $5,000 each. Each partner will also be entitled to receive 3%
interest on their capital account balance at the beginning of the year. Any profit and losses are
to be shared in the ratio 3:2:1 to Chloe, Chen and Yang, respectively. Capital account balances
are Chloe—$25,000, Chen—$20,000 and Yang—$10,000. During 2016, the business earned a
net income of $65,000. Calculate the amount of net income each partner will receive.
Total
Chloe Chen Yang
