Meagan and Jenny are in partnership, sharing profits equally. Provision exists in the partnership agreement for charging
Question:
Meagan and Jenny are in partnership, sharing profits equally. Provision exists in the partner¬ship agreement for charging interest on capital at the rate of 8% p.a. and interest on drawings at 10% p.a. Capital and Drawings account balances are:
Meagan, Capital Jenny, Capital Meagan, Drawings Jenny, Drawings | $ | 96 000 108 000 25 000 32 000 |
Profit before allowing for interest was $150 000. All drawings were made in expectation of profits.
Required
Prepare journal entries to account for interest on capital and on drawings, and any necessary closing entries using:
1. Method 1 — variable capital balances
2. Method 2 — fixed capital balances.
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett