Problem #7 Rules For The Distribution of Profits or Losses

Laguna and Cadelina share profits and losses on a fractional-share basis, with Laguna receiving two-fifths and Cadelina receiving three-fifths. The firm had profits of P650000 this year. Journal entries are provided to close income summary and partners' drawing accounts on December 31, distributing the profits to the partners based on their capital balances and previous drawings for the year.

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Problem #7 Rules For The Distribution of Profits or Losses

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Problem #7

Rules for the Distribution of Profits or Losses

Laguna and Cadelina share profits and losses on a fractional-share with two-fifths for Laguna and three-fifths for
Cadelina. This year the firm has profits of P650000. The beginning Capital balances for the year were P900000 for Laguna
and P1300000 for Cadelina. The balances of the Drawing accounts are P300000 for Laguna and P240000 for Cadelina.

Required:

Journalize the entries to close income summary and the partners’ drawing accounts on Dec 31.

Income Summary 650000

Laguna, Drawing 260000
Cadelina, Drawing 390000
Laguna, Drawing 300000
Cadelina, Drawing 240000
Laguna, Capital 300000
Cadelina, Capital 240000
Laguna, Capital ` 40000
Income Summary 150000
Laguna, Drawing 40000
Cadelina, Capital 150000

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Problem #7 Rules For The Distribution of Profits or Losses

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Problem #7 Rules For The Distribution of Profits or Losses

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Problem #7

Rules for the Distribution of Profits or Losses

Income Summary 650000

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