At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following.PartnerDrawingsCapitalArt Niensted$22,500$40,000Greg Bolen13,50030,000Krista Sayler10,00022,000The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts.To record the division of net income for the year 2020 under each of the following independent assumptions.1.Net income is $28,000. Income is shared 6:3:1.2.Net income is $38,000. Niensted and Bolen are given salary allowances of $14,500 and $10,000, respectively. The remainder is shared equally.3.Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $14,800 salary allowance. The remainder isshared equally.(b)Your answer is partially correct.Journalize the entry to record the division of net income for the year 2020 under each of the above independent assumptions. (Credit account titles areautomatically indented when amount is entered. Do not indent manually.)No. Account Titles and ExplanationDebitCredit1.Income Summary28000A. Niensted, Capital16800G. Bolen, Capital8400K. Sayler, Capital28002.Income Summary38000A. Niensted, Capital22600G. Bolen, Capital14050K. Sayler, Capital13503.Income Summary18000A. Niensted, Capital15200G. Bolen, Capital1200K. Sayler, Capital1600

The question is based on the concept of Partnership Accounting. Generally the net income is shared…

At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following. Partner Drawings Capital Art Niensted $2,500 $40,000 Greg Bolen 13,500 30,000 Krista Sayler 10,000 22,000 The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions.

At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following. Partner Drawings Capital Art Niensted $2,500 $40,000 Greg Bolen 13,500 30,000 Krista Sayler 10,000 22,000 The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following.
Partner
Drawings
Capital
Art Niensted
$22,500
$40,000
Greg Bolen
13,500
30,000
Krista Sayler
10,000
22,000
The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts.
To record the division of net income for the year 2020 under each of the following independent assumptions.
1.
Net income is $28,000. Income is shared 6:3:1.
2.
Net income is $38,000. Niensted and Bolen are given salary allowances of $14,500 and $10,000, respectively. The remainder is shared equally.
3.
Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $14,800 salary allowance. The remainder is
shared equally.
(b)
Your answer is partially correct.
Journalize the entry to record the division of net income for the year 2020 under each of the above independent assumptions. (Credit account titles are
automatically indented when amount is entered. Do not indent manually.)
No. Account Titles and Explanation
Debit
Credit
1.
Income Summary
28000
A. Niensted, Capital
16800
G. Bolen, Capital
8400
K. Sayler, Capital
2800
2.
Income Summary
38000
A. Niensted, Capital
22600
G. Bolen, Capital
14050
K. Sayler, Capital
1350
3.
Income Summary
18000
A. Niensted, Capital
15200
G. Bolen, Capital
1200
K. Sayler, Capital
1600

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