Godfrey and Taylor formed a partnership on 1 July 2015 with initial capital balances of $90 000

Question:

Godfrey and Taylor formed a partnership on 1 July 2015 with initial capital balances of $90 000 and $60 000 respectively. For the year ended 30 June 2016, the Profit or Loss Summary account disclosed a final credit balance of $96 000.

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 Godfrey and Taylor assuming they have agreed to share profits in proportion to each partner’s initial capital balance under both method 1 and method 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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