In the early part of 2021, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2020 but had never used an accountants services.

Hugh and Jacobs began the partnership by contributing $165,000 and $115,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows:

• Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period.
• A compensation allowance of $10,000 was to go to Hugh with a $27,000 amount assigned to Jacobs.
• Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively.

In 2020, revenues totaled $190,000, and expenses were $155,000 (not including the partners compensation allowance). Hugh withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business paid $9,000 for repairs made to Hughs home and charged it to repair expense.

On January 1, 2021, the partnership sold a 10 percent interest to Thomas for $48,000 cash. This money was contributed to the business with the bonus method used for accounting purposes.

Answer the following questions:

1. What journal entries should the partnership have recorded on December 31, 2020?

2. What journal entry should the partnership have recorded on January 1, 2021?

• Required C
• Required D

What journal entries should the partnership have recorded on December 31, 2020? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record entry to reclassify payment made to repair personal residence.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
1

• Record entry to close drawings accounts for 2020.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
2

• Record entry to close revenue and expense accounts for 2020.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
3

• Record the distribution of net income to partners.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
4