Larry, Curly and Moe formed the HydroCarpets partnership onJanuary 1 of the current year. The partners invested assetsand liabilities into the partnership as follows:Larry:Cash$ 55,000Accounts Receivable20,000Curly:Land20,000Building180,000Mortgage payable95,000Moe:Cash35,000Office equipment25,000During the first year of business the net income was$141,000.1) Prepare the journal entries to record the partnership setup2) Prepare net income allocation using following plansseparately. (please note that you need to show me thecalculation formula and steps)Plan1: on a 3:3:4 ratio of partnership agreementPlan2: on an original investment ratio respectivelyPlan3: Interest allowance of 10% on initial investments,salary allowance of $35,000 to Larry, $40,000 to Curly and$45,000 to Moe, with any remaining balance to be sharedequally among the three partners3) Each partner withdrew $30,000 cash from the partnershipduring the year. Please prepare a statement of partners'capital for the year end December31, based on the netIncome Plan2 allocation.

1 Explanations Debit Credit 1 Accounts receivable 55000 Larry, capital 20000…

Larry, Curly and Moe formed the HydroCarpets pa January 1 of the current year. The partners invest and liabilities into the partnership as follows: Larry: Cash $ 55,000 Accounts Receivable Curly: 20,000 Land 20,000 Building 180,000 Mortgage pavable 95.000

Larry, Curly and Moe formed the HydroCarpets pa January 1 of the current year. The partners invest and liabilities into the partnership as follows: Larry: Cash $ 55,000 Accounts Receivable Curly: 20,000 Land 20,000 Building 180,000 Mortgage pavable 95.000

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter10: Partnerships: Formation, Operation, And Basis

Section: Chapter Questions

Problem 41P

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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

Larry, Curly and Moe formed the HydroCarpets partnership on
January 1 of the current year. The partners invested assets
and liabilities into the partnership as follows:
Larry:
Cash
$ 55,000
Accounts Receivable
20,000
Curly:
Land
20,000
Building
180,000
Mortgage payable
95,000
Moe:
Cash
35,000
Office equipment
25,000
During the first year of business the net income was
$141,000.
1) Prepare the journal entries to record the partnership setup
2) Prepare net income allocation using following plans
separately. (please note that you need to show me the
calculation formula and steps)
Plan1: on a 3:3:4 ratio of partnership agreement
Plan2: on an original investment ratio respectively
Plan3: Interest allowance of 10% on initial investments,
salary allowance of $35,000 to Larry, $40,000 to Curly and
$45,000 to Moe, with any remaining balance to be shared
equally among the three partners
3) Each partner withdrew $30,000 cash from the partnership
during the year. Please prepare a statement of partners'
capital for the year end December31, based on the net
Income Plan2 allocation.

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