a. The business is a partnership, and — Les Barnhouse Joan Skoye began new February when each them invested 162 — corporation that issued 000 common shares

Les Barnhouse and Joan Skoye began a new business on February 14 when each of them invested $162,500 in the company. On December 20, it was decided that $62,400 of the company’s cash would be distributed equally between the owners. Two cheques for $31,200 were prepared and given to the owners on December 23. On December 31, the company reported a $124,800 net income. Prepare two sets of journal entries to record the investments by the owners, the distribution of cash to the owners, the closing of the Income Summary account, and the withdrawals or dividends under these alternative assumptions:

a. The business is a partnership, and

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b. The business is a corporation that issued 1,000 common shares.

SOLUTION

a)	Partnership	Partnership	Partnership
Feb.	Feb.	14	Cash	Cash	325,000	325,000
			Les Barnhouse, Capital	Les Barnhouse, Capital			162,500	162,500	162,500
			Joan Skoye, Capital	Joan Skoye, Capital			162,500	162,500	162,500
			To record investment into business by partners.	To record investment into business by partners.
Dec.	Dec.	23	Les Barnhouse, Withdrawals	Les Barnhouse, Withdrawals	31,200	31,200
			Joan Skoye, Withdrawals	Joan Skoye, Withdrawals	31,200	31,200
			Cash To record withdrawals by owners.	Cash To record withdrawals by owners.			62,400	62,400	62,400
		31	Income Summary	Income Summary	124,800	124,800
			Les Barnhouse, Capital	Les Barnhouse, Capital			62,400	62,400	62,400
			Joan Skoye, Capital	Joan Skoye, Capital			62,400	62,400	62,400
			To record closing of income summary to capital.	To record closing of income summary to capital.
		31	Les Barnhouse, Capital	Les Barnhouse, Capital	31,200	31,200
			Joan Skoye, Capital	Joan Skoye, Capital	31,200	31,200
			Les Barnhouse, Withdrawals	Les Barnhouse, Withdrawals			31,200	31,200	31,200
			Joan Skoye, Withdrawals	Joan Skoye, Withdrawals			31,200	31,200	31,200
			To record closing of withdrawals to capital.	To record closing of withdrawals to capital.
b)	Corporation	Corporation	Corporation
Feb.	Feb.	14	Cash	Cash	Cash	325,000	325,000
			Common Shares	Common Shares	Common Shares			325,000
			To record issuance of common shares.	To record issuance of common shares.	To record issuance of common shares.
Dec.	Dec.	20	Cash Dividends	Cash Dividends	Cash Dividends	62,400	62,400
			Common Dividend Payable	Common Dividend Payable	Common Dividend Payable			62,400
			To record declaration of dividends.	To record declaration of dividends.	To record declaration of dividends.
		23	Common Dividend Payable	Common Dividend Payable	Common Dividend Payable	62,400	62,400
			Cash	Cash	Cash			62,400
			To record payment of dividends.	To record payment of dividends.	To record payment of dividends.
		31	Income Summary	Income Summary	Income Summary	124,800	124,800
			Retained Earnings	Retained Earnings	Retained Earnings			124,800
			To record closing of income summary to retained earnings.	To record closing of income summary to retained earnings.	To record closing of income summary to retained earnings.	To record closing of income summary to retained earnings.	To record closing of income summary to retained earnings.
		31	Retained Earnings	Retained Earnings	Retained Earnings	62,400	62,400
			Cash Dividends	Cash Dividends	Cash Dividends			62,400
			To record closing of dividends to retained earnings.	To record closing of dividends to retained earnings.	To record closing of dividends to retained earnings.	To record closing of dividends to retained earnings.	To record closing of dividends to retained earnings.