At the end of its first year of operations on December 31, 2020, NBS Company's accounts show the following. Partner Drawings Capital Art Niensted $23,000 $48,000 Greg Bolen 14,000 30,000 Krista Sayler 10,000 25,000 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. Instructions: a. Journalize the entry to record the division of net income for the year 2020 under each of the following independent assumptions. SHOW YOUR CALCULATIONS. 1. Net income is $40,000. Income is shared 6:3:1. 2. Net income is $50,000. Niensted and Bolen are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally. 3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $12,000 salary allowance. The remainder is shared equally. b. Prepare entries to close the drawing accounts. c. Prepare a partners' capital statement for the year under assumption (3) above.
At the end of its first year of operations on December 31, 2020, NBS Company's accounts show the following. Partner Drawings Capital Art Niensted $23,000 $48,000 Greg Bolen 14,000 30,000 Krista Sayler 10,000 25,000 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. Instructions: a. Journalize the entry to record the division of net income for the year 2020 under each of the following independent assumptions. SHOW YOUR CALCULATIONS. 1. Net income is $40,000. Income is shared 6:3:1. 2. Net income is $50,000. Niensted and Bolen are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally. 3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $12,000 salary allowance. The remainder is shared equally. b. Prepare entries to close the drawing accounts. c. Prepare a partners' capital statement for the year under assumption (3) above.
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, NBS Company's accounts show the
following.
Partner Drawings Capital
Art Niensted $23,000 $48,000
Greg Bolen 14,000 30,000
Krista Sayler 10,000 25,000
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.
Instructions:
a.Journalize the entry to record the division of net income for the year 2020 under each of the
following independent assumptions. SHOW YOUR CALCULATIONS.
1. Net income is $40,000. Income is shared 6:3:1.
2. Net income is $50,000. Niensted and Bolen are given salary allowances of $15,000 and $10,000,
respectively. The remainder is shared equally.
3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances.
Niensted is given a $12,000 salary allowance. The remainder is shared equally.
b. Prepare entries to close the drawing accounts.
c. Prepare a partners' capital statement for the year under assumption (3) above.
following.
Partner Drawings Capital
Art Niensted $23,000 $48,000
Greg Bolen 14,000 30,000
Krista Sayler 10,000 25,000
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.
Instructions:
a.
following independent assumptions. SHOW YOUR CALCULATIONS.
1. Net income is $40,000. Income is shared 6:3:1.
2. Net income is $50,000. Niensted and Bolen are given salary allowances of $15,000 and $10,000,
respectively. The remainder is shared equally.
3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances.
Niensted is given a $12,000 salary allowance. The remainder is shared equally.
b. Prepare entries to close the drawing accounts.
c. Prepare a partners' capital statement for the year under assumption (3) above.
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