Diala and Tamer, partners in DT Company, have capital balances on January 1, 2016 of $72,000 and $48,000 respectively. The net income for the year is $86,000. The partnership income-sharing agreement indicates: 1. Annual Salaries of $24,000 for Diala and $16,000 for Tamer. 2. Interest of 10% on beginning capital balances for all partners. 3. Remaining income or loss to be shared in accordance with the ratio of the partners' original capital investments. Diala ratio= 72,000/(72,000+48,000)=0.6=60% Tamer=48,000/(72,000+48,000)=0.4=40% Instructions: (a) Prepare a schedule showing the distribution of net income for the partnership. (b)Prepare the journal entry to record the division of net income.

Diala and Tamer, partners in DT Company, have capital balances on January 1, 2016 of $72,000 and $48,000 respectively. The net income for the year is $86,000. The partnership income-sharing agreement indicates: 1. Annual Salaries of $24,000 for Diala and $16,000 for Tamer. 2. Interest of 10% on beginning capital balances for all partners. 3. Remaining income or loss to be shared in accordance with the ratio of the partners' original capital investments. Diala ratio= 72,000/(72,000+48,000)=0.6=60% Tamer=48,000/(72,000+48,000)=0.4=40% Instructions: (a) Prepare a schedule showing the distribution of net income for the partnership. (b)Prepare the journal entry to record the division of net income.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Farmer and Taylor formed a partnership with capital contributions of $245,000 and $295,000,…

A: Total share of income = Salary allowance + Share in balance of incomeThe journal entry to allocate…

Q: Kwong and Morales entered into a partnership as at Mar. 1, 2019 by the investing P125,000 and…

A: Statement of partner's capital reports the changes in the capital accounts during an accounting…

Q: receive 10% interest on their average capital balances. Average capital balances are calculated at…

A: Allocation of Profit to Partners The purpose of forming the partners is to distribute the profit in…

Q: The net income of the Jason and Browning partnership is $445000. The partnership agreement specifies…

A: Partnership is a contract or arrangement between two or more than two persons, in which they invest…

Q: Oliva Tsang and David Breck began a partnership by investing $5,000 and $45,000 respectively. For…

A: Introduction:- Oliva Tsang and David Breck invested $5,000 and $45,000, respectively, to start their…

Q: Coburn (beginning capital, $60,000) and Webb (beginning capital $90,000) are partners. During 2020,…

A: Net income earned by a partnership is distributed between partners at the end of period as per the…

Q: 3. The partners agreed to share income by giving a $56,000 per year salary allowance to Ramer, a…

A: Partnership is a business structure where two or more individuals come together to jointly own and…

Q: A and B share profits and losses equally. A and B receive salary allowances of P20,000 and P30,000,…

A: Here in this case, we are required to make allocation of profit. Partnership is a agreement between…

Q: McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The…

A: Partnership:Partnership can be defined as the agreement between two or more persons to carry out…

Q: Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing agreement. The…

A: Profit sharing ratio = 2:3:5 Bonus to Zane = 10% of the Original amount of Net Income Salary…

Q: After closing the revenue and expense accounts, the profit for the year ended December 31, 2024, of…

A: Understanding the basics:Partnership is an agreement between two or more person who works together…

Q: The Prince-Robbins partnership has the following capital account balances on January 1, 2018:…

A: Jeffrey's investment in business = $52,000 Jeffrey's share in profit = 20% The total capital of the…

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

Diala and Tamer, partners in DT Company, have capital balances on January
1, 2016 of $72,000 and $48,000 respectively. The net income for the year is
$86,000. The partnership income-sharing agreement indicates:
1. Annual Salaries of $24,000 for Diala and $16,000 for Tamer.
2. Interest of 10% on beginning capital balances for all partners.
3. Remaining income or loss to be shared in accordance with the ratio of
the partners' original capital investments.
Diala ratio= 72,000/(72,000+48,000)=0.6=60%
Tamer=48,000/(72,000+48,000)=0.4=40%
Instructions:
(a) Prepare a schedule showing the distribution of net income for the
partnership.
(b)Prepare the journal entry to record the division of net income.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 a) Distribution of net Income

VIEW

Step 3 a) Answer

VIEW

Step 4 b) Journal entry

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A. B and C are partners with average capital balances during 2020 of P945,000, P477,300 and P324,700, respectively. The partners receive 10% interest on their average capital balances, salaries of P 244,650 to A and P 165,250 to C, any residual profit or loss is divided in the ratio 3:2:1. In 2020, the partnership had a net loss of P251,248 before the interest and salaries to partners. What is the change in the capital balance of
Coburn (beginning capital, $56,000) and Webb (beginning capital $92,000) are partners. During 2022, the partnership earned net income of $69,000, and Coburn made drawings of $17,000 while Webb made drawings of $26,000. Assume the partnership income-sharing agreement calls for income to be divided with a salary of $37,000 to Coburn and $32,000 to Webb, interest of 12% on beginning capital, and the remainder divided 50%-50%. Prepare the journal entry to res the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Income Summary 69000 Coburn, Capital 34840 34160 Webb, Capital Compute the partners' ending capital balances under the assumption in part (c) above. Ending capital Coburn Webb 34840
AA, BB and Cc are partners with average capital balances during 2021 of 360,000, 180,000 and120,000 respectively. Partners receive 10% interest on their average capital balances. After deductingsalaries of 90,000 to AA and 60,000 to CC the residual profit or loss is divided equally. In 2021, thepartnership sustained a 99,000 loss before interest and salaries to partners. By what amount shouldAA’s capital account change?a. 21,000 increaseb. 33,000 decreasec. 105,000 decreased. 126,000 increase
The partnership agreement of Jones, King, and Lane provides for the annual allocation of the business's profit or loss in the following sequence: • Jones, the managing partner, receives a bonus equal to 15 percent of the business's profit. • Each partner receives 12 percent interest on average capital investment. • Any residual profit or loss is divided equally. The average capital investments for 2021 were as follows: Jones King Lane The partnership earned $66,000 net income for 2021. Prepare a schedule showing how the 2021 net income should be allocated to the partners. (Loss amounts should be indicated with a minus sign.) Net income Bonus Interest $ 145,000 290,000 435,000 Remainder to allocate Total allocation $ Jones 0 $ King 0 $ Lane $ 0 $ Total 0 0 0 0 0
At December 31, year 1, RR and SH are partners with capital balances of $40,000 and $20,000, and they share profit and loss in the ratio of 2:1, respectively. On this date PP invests $17,000 cash for a one fifth interest in the capital and profit of the new partnership. Assuming that the bonus method is used. how much should be credited to PP's capital account on December 31?
Peter and Paul formed a partnership on January 1, 2020, and agreed to share net income and losses 90 percent and 10 percent, respectively. Peter invested cash of P250,000. Paul invested no assets but had a specialized expertise and managed the firm full time. The partnership contract provided for the following: a. Partners' capital accounts are to be credited annually with interest at 5 percent of beginning capital account balances. b. Paul is to be paid a salary of P 10,000 a month. c. Paul is to receive a bonus of 20 percent of income before deduction of salary, bonus and interest on partners' capital account balances. d. Bonus, interest, and Paul salary are considered expenses. The Income Statement for the year ended 2015 for the partnership includes the following: Revenue P 964,500 Expenses (including salary and interest) 497,000 Net income P 467,500 What is Paul's share in net income?
A B and C are partners with capital balances of $90,000, $70,000, and $50,000, respectively. The partners agreed to share profits and losses as follows: Salary allowances of $7,000 to A, $8,000 to B and $14,000 to C. Interest allowances of 1096 on beginning of year capital balances Balance to be divided in the ratio of 2:11. If profit for the year 15 $250,000, calculate each partner's share and prepare the appropriate journal entry close the income Summary to the capital accounts Next Page Support | PowerSchool Communit Time left for this
On January 1, 2021, Kobe, Lebron, and Michael formed a partnership with respective capital contribution of P2,000,000, P5,000,000, and P3,000,000. The articles of co-partnership provides that profit or loss shall be distributed accordingly: a. 20% interest on original capital contribution. b. P30,000 monthly salary for Kobe and P50,000 monthly salary for Michael. c. The remainder shall be distributed on the basis of original capital contribution ratio. On December 31, 2021, Kobe and Lebron made withdrawals of P500,000 and P1,000,000, respectively. the statement of financial position of the partnership shows that Lebron’s capital on December 31, 2031 is P6,500,000. What is the capital balance of Kobe on December 31, 2021
The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $108,000, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $600,000, Gise $1,200,000, and Bosco $1,800,000. If partnership net income is $540,000, the amount allocated to Alix should be a. $90,000. Ch10,11,12 Principles of Accounting I b. $162,000. c. $180,000. d. $198,000.
The balance in Xue's capital account includes an additional investment of $10,000 made on May 5, 20Y2. Instructions: 1. Prepare an income statement for 20Y2, indicating the division of net income. The partnership agreement provides for salary allowances of $38,000 to Ramirez and $46,000 to Xue, allowances of 10% on each partner's capital balance at the beginning of the fiscal year, and equal division of the remaining net income or a net loss. 2. prepare a statement of partnership equity for 20Y2. 3. Prepare a balance sheet as of the end of 20Y2.
The November production of MVP's Minnesota Division consisted of batch P25 (2, 600 professional basketballs) and batch S33 (5,000 scholastic basketballs). Each batch was started and finished during November, and there was no beginning or ending work in process. Costs incurred were as follows: Direct Material: Batch P25, $57,200, including $4,000 for packaging material; batch S33, $63,750. Conversion Costs: Preparation Department, predetermined rate of $5.30 per unit; Finishing Department, predetermined rate of $6.00 per unit; Packaging Department, predetermined rate of $0.40 per unit. (Only the professional balls are packaged.) 3. Prepare journal entries to record the cost flows during November.
Farmer and Taylor formed a partnership with capital contributions of $245,000 and $295,000, respectively. Their partnership agreement calls for Farmer to receive a $79,000 per year salary allowance. The remaining income or loss is to be divided equally. Assuming net income for the current year is $189,000, the journal entry to allocate net income is: dit Fo Debit Income Summary, $189,000; Credit Farmer, Capital, $94,500; Credit Taylor, Capital, $94,500. Debit Income Summary, $189,000; Credit Farmer, Capital, $166,000; Credit Taylor, Capital, $23,000. Debit Income Summary, $189,000; Credit Farmer, Capital, $48,840; Credit Taylor, Capital, $140,160. Debit Income Summary, $189,000; Credit Farmer, Capital, $134,000; Credit Taylor, Capital, $55,000. Debit Income Summary, $189,000; Credit Taylor, Capital, $134,000; Credit Farmer, Capital, $55,000.