Question

 P12.2A Financial Statement (LO 2) At the end of its first year of operations on December 31, 2020, NBS Company's accounts show the following.

 Journalize divisions of net income and prepare a partners' capital statement.

 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.

 Instructions

 a. Journalize the entry to record the division of net income for the year 2020 under each of the following independent assumptions.

 1. Net income is $30,000. Income is shared 6:3:1.

 2. Net income is $40,000. Niensted and Bolen are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally.

 3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,000 salary allowance. The remainder is shared equally.

 b. Prepare a schedule showing the division of net income under assumption (3) above. 

 c. Prepare a partners' capital statement for the year under assumption (3) above.

Answer 1

a)

Case 1:

Account title	Debit	credit
Income summary	30000
Art Niensted capital [30000*6/10]		18000
Greg Bolen capital [30000*3/10]		9000
Krista Sayler capital [30000*1/10]		3000

**6+3+1=10

Case 2:

	Art Niensted	Greg Bolen	Krista Sayler
salary allowance	15000	10000	0
Remaining share in net income [40000-15000-10000= 15000 in 1:1:1]	5000	5000	5000
Total share in net income	20000	15000	5000

Account title	Debit	credit
Income summary	40000
Art Niensted capital		20000
Greg Bolen capital		15000
Krista Sayler capital		5000

Case 3:

	Art Niensted	Greg Bolen	Krista Sayler	Total
salary allowance	15000	0	0	15000
Interest on capital	4800 [48000*10%]	3000 [30000*10%]	2500   [25000*10%]	10300
Remaining share in net income [19000-15000-10300=-6300] in 1:1:1]	-2100    [6300*1/3]	-2100	-2100	-6300
Total share in net income	17700	900	400	19000

Account title	Debit	credit
Income summary	19000
Art Niensted capital		17700
Greg Bolen capital		900
Krista Sayler capital		400

b)

	Art Niensted	Greg Bolen	Krista Sayler	Total
salary allowance	15000	0	0	15000
Interest on capital	4800 [48000*10%]	3000 [30000*10%]	2500   [25000*10%]	10300
Remaining share in net income [19000-15000-10300=-6300] in 1:1:1]	-2100    [6300*1/3]	-2100	-2100	-6300
Total share in net income	17700	900	400	19000

c)

	Art Niensted	Greg Bolen	Krista Sayler
Capital at beginning	48000	30000	25000
Less :Drawings	-23000	-14000	-10000
share in net income	17700	900	400
Capital balance at end	42700	16900	15400