1. Journal entry to record interest on capital for Bob and Bubbly:
Date Account Debit Credit
Feb 29 Interest Expense 40,800
Bob's Capital 21,600
Bubbly's Capital 19,200
2. Journal entry to record Bubbly's salary:
Date Account Debit Credit
Feb 29 Salary Expense 192,000
Bubbly's Capital 192,000
3. Journal entry to record Bob's salary:
Date Account Debit Credit
Feb 29 Salary Expense 96,000
Bob's Capital 96,000
4. Journal entry to distribute remaining profit:
Date Account Debit Credit
Feb 29 Profit Distribution 420,000
Bob's Capital 336,000
Bubbly's Capital 84,000
Bobblyís Laundromat is a partnership with partners Bob and Bubbly as
partners.
Bob has contributed capital amounting to R180 000, whereas Bubbly has
contributed R150 000 when the partnership was formed at 1 March 2012. At
29 February 20.20, the end of the first reporting period, the profit for the
period according to the statement of profit or loss amounted to R525 000.
The partnership agreement includes the following stipulations:
The partners will be paid a market-related interest of 12% on their capital
contributions.
Bubbly will be paid a monthly salary of R16 000.
Bob will be paid a monthly salary of R8 000.
The remainder of the profit will be split between Bob and Bubbly in the ration
4:1
Required
a) Prepare the journal entries that are necessary to record the interest on
capital and salaries transactions for the year ended 29 February 20.20
1 answer
1 answer