At the end of its first year of operations on December 31, 2010, KAT Company’s accounts show the following. Partner Drawings Capital H. Krik $15,000 $40,000 N. Andres 10,000 25,000 S.Thabo 5,000 15,000 The capital balance represents each partner’s initial capital investment. Therefore, net income or net loss for 2010 has not been closed to the partners’ capital accounts. Required (A)Journalize the entry to record the division of net income for 2010 under each of the independent assumptions: (1) Net income is $50,000. Income is shared 5:3:2. (2) Net income is $40,000. Kirk and Andres are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally. (3) Net income is $37,000. Each partner is allowed an interest of 10% on beginning capital balances. Kirk is given a $20,000 salary allowance. The remainder is shared equally. (B) Prepare a schedule showing the division of net income under the assumption (3) above. (C) Prepare a partners’ capital statement for the year under the assumption (3) above. (D)Give 4 Characteristics and restrictions on the role of Partners in a Limited Partnership
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
At the end of its first year of operations on December 31, 2010, KAT Company’s accounts
show the following.
Partner Drawings Capital
H. Krik $15,000 $40,000
N. Andres 10,000 25,000
S.Thabo 5,000 15,000
The capital balance represents each partner’s initial capital investment. Therefore, net income
or net loss for 2010 has not been closed to the partners’ capital accounts.
Required
(A)Journalize the entry to record the division of net income for 2010 under each of the
independent assumptions:
(1) Net income is $50,000. Income is shared 5:3:2.
(2) Net income is $40,000. Kirk and Andres are given salary allowances of $15,000 and
$10,000, respectively. The remainder is shared equally.
(3) Net income is $37,000. Each partner is allowed an interest of 10% on beginning capital
balances. Kirk is given a $20,000 salary allowance. The remainder is shared equally.
(B) Prepare a schedule showing the division of net income under the assumption (3) above.
(C) Prepare a partners’ capital statement for the year under the assumption (3) above.
(D)Give 4 Characteristics and restrictions on the role of Partners in a Limited
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