PLEASE FOLLOW THE INSTRUCTION Garity, Maureen, and David decided to form a partn

Question

PLEASE FOLLOW THE INSTRUCTION

Garity, Maureen, and David decided to form a partnership called OnTime Copy Shop. The partners will invest the following assets in the business:

They are considering the following plans for the division of net income or net loss:
1. Equally
2. Garity 20%, Maureen 40%, and White 40%
3. In the same ratio as the beginning balances of their capital accounts.
Instructions:
Assume that the business had a net income of $17,500 in its first year of operation. Calculate the division of net income under each of three plans and pass a closing journal entry. Also, prepare a Statement of Partners' Equity.

Explanation / Answer

Profit & Loss A/c

To Garity Capital A/c

To Maureen Capital A/c

To White Capital A/c

(Being closing entry for transfer of profit to Partners Capital A/c)

Garity Maureen white Net Income 1    5,833.33    5,833.33    5,833.33    17,500.00 2    3,500.00    7,000.00    7,000.00    17,500.00 3 7818.00 4149.00 5533.00    17,500.00 Total Capital Ratio 65000 34500 46000 145500 or 130 69 92 291

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