Question

At the end of its first year of operations on December 31, 2020, Sandhill Company’s accounts show the following. Partner Drawings Capital Art Niensted $23,100 $45,000 Greg Bolen 14,200 38,500 Krista Sayler 10,500 28,500 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. To record the division of net income for the year 2020 under each of the following independent assumptions. 1. Net income is $28,600. Income is shared 6:3:1. 2. Net income is $39,200. Niensted and Bolen are given salary allowances of $15,500 and $10,200, respectively. The remainder is shared equally. 3. Net income is $18,400. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $13,500 salary allowance. The remainder is shared equally.

Prepare a schedule showing the division of net income under assumption (3) above. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).) DIVISION OF NET INCOME Art Niensted Greg Bolen Krista Sayler Total Salary allowance Interest allowance on capital Total salaries and interest Remaining excess/ deficiency Total division of net income

Journalize the entry to record the division of net income for the year 2020 under each of the above independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. 3.

Prepare a partners’ capital statement for the year under assumption (3) above. (List items that increase partners capital first.)

SANDHILL COMPANY Partners’ Capital Statement choose the accounting period December 31, 2020For the Year Ended December 31, 2020For the Month Ended December 31, 2020
		Art Niensted		Greg Bolen		Krista Sayler		Total
select an opening name DrawingsExpensesNet Income / (Loss)Capital, January 1Capital, December 31RevenuesTotal ExpensesTotal Revenues
select between addition and deduction AddLess : select an item DrawingsExpensesNet Income / (Loss)Capital, January 1Capital, December 31RevenuesTotal ExpensesTotal Revenues
select between addition and deduction LessAdd : select an item DrawingsExpensesNet Income / (Loss)Capital, January 1Capital, December 31RevenuesTotal ExpensesTotal Revenues
select a closing name DrawingsExpensesNet Income / (Loss)Capital, January 1Capital, December 31RevenuesTotal ExpensesTotal Revenues

Answer 1

Solution 1:

Division of Income
S. No.	Particulars	Total	Art Niensted	Greg Bolen	Krista Sayler
1	Income is shared 6:3:1
	Net Income (6:3:1)	$28,600.00	$17,160.00	$8,580.00	$2,860.00
2	Salary allowance and remaining equally:
	Net Income	$39,200.00
	Salary Allowance	$25,700.00	$15,500.00	$10,200.00	$0.00
	Remaining income (1:1:1)	$13,500.00	$4,500.00	$4,500.00	$4,500.00
	Total share of income	$39,200.00	$20,000.00	$14,700.00	$4,500.00
3	Interest on capital, Salary allowance and ramainder equally:
	Net Income	$18,400.00
	Interest on capital	$11,200.00	$4,500.00	$3,850.00	$2,850.00
	Salary Allowance	$13,500.00	$13,500.00	$0.00	$0.00
	Remaining income (1:1:1)	-$6,300.00	-$2,100.00	-$2,100.00	-$2,100.00
	Total share of income	$18,400.00	$15,900.00	$1,750.00	$750.00

Solution 2:

Journal Entries
S. No.	Particulars	Debit	Credit
1	Income Summary Dr	$28,600.00
	To A. Niensted Capital		$17,160.00
	To G. Bolen Capital		$8,580.00
	To K. Sayler Capital		$2,860.00
	(To record division of income)
2	Income Summary Dr	$39,200.00
	To A. Niensted Capital		$20,000.00
	To G. Bolen Capital		$14,700.00
	To K. Sayler Capital		$4,500.00
	(To record division of income)
3	Income Summary Dr	$18,400.00
	To A. Niensted Capital		$15,900.00
	To G. Bolen Capital		$1,750.00
	To K. Sayler Capital		$750.00
	(To record division of income)

Solution 3:

Pharoah company
Partner's Capital Statement
For the year ended Dec 31, 2020
Particulars	Art Niensted	Greg Bolen	Krista Sayler	Total
Beginning Capital balance	$45,000.00	$38,500.00	$28,500.00	$112,000.00
Add: Net Income	$15,900.00	$1,750.00	$750.00	$18,400.00
	$60,900.00	$40,250.00	$29,250.00	$130,400.00
Less: Drawings	$23,100.00	$14,200.00	$10,500.00	$47,800.00
Ending capital balances	$37,800.00	$26,050.00	$18,750.00	$82,600.00