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.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting

ISBN: 978-1118608227

9th edition

Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett

Question Posted: