Question

Question 3 (15 scores) Groucho, Harpo, and Chico go into partnership on January 1,2015. Groucho contributes $90,000, Harpo $70,000, and Chico $40,000 to a business called Marx Brothers' Partnership. On a monthly basis, each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided. Assume that Groucho receives $2,700 cash per month. Required: Part a. Prepare the journal entry for the initial investment. Part b. Determine the monthly distribution amounts for each of the three partners. Part c. Prepare the journal entry that would be made in one month for the monthly distribution. Part d. Prepare the journal entry for the allocation of an annual net income of $84,000. For purposes of this journal entry, assume Sales Revenue totaled $116,000 and that all expenses, totaling $32,000, were recorded in a single account called Operating Expenses. Part e. Prepare the journal entry to close the Drawings accounts at the end of the year Part f. Prepare a Statement of Partners' Equity (assume no additional investments made). Question 4 (40 scores) Condensed financial data of Monopoly Corporation appear below: Monopoly Corporation Comparative Balance Sheet December 31 Prior Year Year Assets $28,000 32,000 70,000 2,000 200,000 $44,000 Cash Accounts receivable Inventories Prepaid rent Property, plant, and equipment 2,500 224,000 (55,000)(40,000)

Answer 1

Question 3:

Part a. :

In the books of Marx Brothers' Partnership :

Date	Account Titles	Debit	Credit
		$	$
January 1, 2015	Cash	200,000
	Groucho, Capital		90,000
	Harpo, Capital		70,000
	Chicco, Capital		40,000

Part b.:

Capital contribution ratio = 0.45 : 0.35 : 0.20

Total cash distributed per month = $ 2,700 / 0.45 = $ 6,000

Cash distributed to Harpo = $ 6,000 x 0.35 = $ 2,100

Cash distributed to Chicco = $ 6,000 x 0.20 = $ 1,200.

Part c:

Date	Account Titles	Debit	Credit
		$	$
January 31, 2015	Groucho, Drawings	2,700
	Harpo, Drawings	2,100
	Chicco, Drawings	1,200
	Cash		6,000

Part d. :

Date	Account Titles	Debit	Credit
		$	$
December 31, 2015	Sales Revenue	116,000
	Groucho, Capital ( $ 84,000 x 0.45)		37,800
	Harpo, Capital ( $ 84,000 x 0.35)		29,400
	Chicco, Capital ( $ 84,000 x 0.20)		16,800
	Operating Expenses		32,000

Part f:

Marx Brothers Partnership Statement of Partners' Equity For the year ended December 31, 2015
	Groucho	Harpo	Chicco
Capital contributed, January 1, 2015	$ 90,000	$ 70,000	$ 40,000
Add: Net Income	37,800	29,400	16,800
Totals	127,800	99,400	56,800
Less: Drawings	(32,400)	(25,200)	(14,400)
Partners' Equity, December 31, 2015	$ 95,400	$ 74,200	$ 42,400