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Problems Problem 11-1A Methods of allocating partnership profit L03 eXcel CHECK FIGURE: c. Cr Jenkins, Capital: $195,000 Jenkins, Willis, and Trent invested $200,000, $350,000, and $450,000, respectively, in a partnership. During its first year, the firm recorded profit of $600,000. Required Prepare entries to close the firm's Income Summary account as of December 31 and to allocate the profit to the partners under each of the following assumptions: a. The partners did not produce any special agreement on the method of distributing profits b. The partners agreed to share profit and losses in the ratio of their beginning investments. e. The partners agreed to share profit by providing annual salary allowances of $110,000 to Jenkins, $120,000 to Willis, and $55,000 to Trent, allowing 15% interest on the partners' beginning investments; and sharing the remainder equally.

Answer 1

Answer

• All working forms part of the answer
• Journal entries for all 3 requirements:

Requirement	Accounts title	Debit	Credit	Working
a	Income Summary	$600,000		Each will get Net Income of $ 600000 / 3 partners = $ 200000
	Capital, Jenkins		$200,000
	Capital, Willis		$200,000
	Capital, Trent		$200,000
	(Net Income distributed equally)
b	Income Summary	$600,000		[Total capital invested = $ 1,000,000]
	Capital, Jenkins		$120,000	[600000 x 200000/1000000]
	Capital, Willis		$210,000	[600000 x 350000/1000000]
	Capital, Trent		$270,000	[600000 x 450000/1000000]
	(Net Income distributed equally)
				[See Working below]
c	Income Summary	$600,000
	Capital, Jenkins		$195,000
	Capital, Willis		$227,500
	Capital, Trent		$177,500
	(Net Income distributed)

--Working for Requirement ‘c’

				Net Income
	Jenkins	Willis	Trent	Distributed	To be distributed
Net Income					$600,000
Salary Allowance	$110,000	$120,000	$55,000	$285,000	$315,000
Interest on Capital at 15%	$30,000	$52,500	$67,500	$150,000	$165,000
$165000 shared equally	$55,000	$55,000	$55,000	$165,000	$0
Total Net Income distributed	$195,000	$227,500	$177,500	$600,000