Syawla and Reven began a partnership by investing $120,000 and $230,000, respectively. During its first year ended Dec 31, 2016, the partnership had a $99,000 net loss. The partners have agreed to share income and loss by granting a $12,000 per month salary allowance to Syawla, a $6,000 per month salary allowance to Reven, 10% interest on their initial capital investments, and the remaining balance shared according to their initial capital balances. (round to whole )

Syawla and Reven began a partnership by investing $120,000 and $230,000, respectively. During its first year ended Dec 31, 2016, the partnership had a $99,000 net loss. The partners have agreed to share income and loss by granting a $12,000 per month salary allowance to Syawla, a $6,000 per month salary allowance to Reven, 10% interest on their initial capital investments, and the remaining balance shared according to their initial capital balances. (round to whole )

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

1. Prepare calculations showing how the $99,000
loss should be allocated to the partners. Hint:
Consider a table like the one below. Excel will
make your work very easy.
SYAWLA REVEN TOTAL BALANCE
Net Income
|(loss)
Interest
Allowances
Salary
Allowances
Share of
Balance
Total
2. Prepare a journal entry to record the allocation from
your calculations above

Syawla and Reven began a partnership by investing
$120,000 and $230,000, respectively. During its first
year ended Dec 31, 2016, the partnership had a
$99,000 net loss. The partners have agreed to share
income and loss by granting a $12,000 per month
salary allowance to Syawla, a $6,000 per month salary
allowance to Reven, 10% interest on their initial capital
investments, and the remaining balance shared
according to their initial capital balances. (round to
whole %)

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