Kimble and Sykes will serve as the senior partners because of their years of experience. To establish the business, Kimble, Sykes, and Gerard contribute cash and other properties valued at $248,000, $200,000, and $112.000, respectively. An articles of partnership agreement is drawn up stipulating the following: • Personal drawings are allowed annually up to an amount equal to 10 percent of the partner's beginning capital balance for the year. • Profits and losses are allocated according to the following plan: 1. Each partner receives an annual salary allowance of $55 per billable hours worked. 2. Interest is credited to the partners' capital accounts at the rate of 12 percent of the beginning capital balance for the year. 3. Kimble and Sykes are eligible for an annual bonus of 10 percent of net income after subtracting the bonus, salary allowance, and Interest. The agreement also states that there will be no bonus If there is a net loss or if salary and Interest result in a negative remainder of net income to be distributed. 4. Any remaining partnership profit or loss is to be divided evenly among all partners. On January 1, 2023, the partners admit Nichols to the partnership. Nichols contributes cash directly to the business in an amount equal to a 25 percent interest in the book value of the partnership property subsequent to this contribution. The partnership profit and loss
Kimble and Sykes will serve as the senior partners because of their years of experience. To establish the business, Kimble, Sykes, and Gerard contribute cash and other properties valued at $248,000, $200,000, and $112.000, respectively. An articles of partnership agreement is drawn up stipulating the following: • Personal drawings are allowed annually up to an amount equal to 10 percent of the partner's beginning capital balance for the year. • Profits and losses are allocated according to the following plan: 1. Each partner receives an annual salary allowance of $55 per billable hours worked. 2. Interest is credited to the partners' capital accounts at the rate of 12 percent of the beginning capital balance for the year. 3. Kimble and Sykes are eligible for an annual bonus of 10 percent of net income after subtracting the bonus, salary allowance, and Interest. The agreement also states that there will be no bonus If there is a net loss or if salary and Interest result in a negative remainder of net income to be distributed. 4. Any remaining partnership profit or loss is to be divided evenly among all partners. On January 1, 2023, the partners admit Nichols to the partnership. Nichols contributes cash directly to the business in an amount equal to a 25 percent interest in the book value of the partnership property subsequent to this contribution. The partnership profit and loss
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.
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Manji
Transcribed Image Text:Kimble, Sykes, and Gerard open an accounting practice on January 1, 2022, in Chicago, Illinois, to be operated as a partnership.
Kimble and Sykes will serve as the senior partners because of their years of experience. To establish the business, Kimble, Sykes, and
Gerard contribute cash and other properties valued at $248,000, $200,000, and $112,000, respectively. An articles of partnership
agreement is drawn up stipulating the following:
• Personal drawings are allowed annually up to an amount equal to 10 percent of the partner's beginning capital balance for the year.
• Profits and losses are allocated according to the following plan:
1. Each partner receives an annual salary allowance of $55 per billable hours worked.
2. Interest is credited to the partners' capital accounts at the rate of 12 percent of the beginning capital balance for the year.
3. Kimble and Sykes are eligible for an annual bonus of 10 percent of net Income after subtracting the bonus, salary allowance, and
Interest. The agreement also states that there will be no bonus If there is a net loss or if salary and Interest result in a negative
remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.
On January 1, 2023, the partners admit Nichols to the partnership. Nichols contributes cash directly to the business in an amount equal
to a 25 percent Interest in the book value of the partnership property subsequent to this contribution. The partnership profit and loss
sharing agreement is not altered upon Nichols's entrance Into the firm; the general provisions continue to be applicable.
The billable hours for the partners during the first three years of operation follow:
2022
2023
Kimble
Sykes
Gerard
Nichols
2822
2023
2824
2,660
2,400
2,260
0
The partnership reports net Income (loss) for 2022 through 2024 as follows:
$ 306,000
(14,800)
501,000
Each partner withdraws the maximum allowable amount each year.
1,800
1,500
1,380
1,560
Net income
Salary allowance
Interest
Bonus
Remainder to allocate
Required:
a. Prepare schedules that allocate each year's net Income to the partners.
b. Prepare in appropriate form a statement of partners' capital for the year ending December 31, 2024.
Total allocation
Complete this question by entering your answers in the tabs below.
Req A 2022 Req A 2023 Req A 2024
Prepare schedules that allocate for 2022 net income to the partners.
Note: Loss amounts should be indicated with a minus sign.
$
2024
Net Income Allocation-2022
Kimble
Sykes
1,888
1,620
1,310
1,550
Req B
0 $
< Reg A 2022
0 $
Gerard
0 $
Totals
Req A 2023 >
0
0
0
0
0
0
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