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 mor distribution Part d. Prepare the journal entry for the allocation of an annual net income of $84,000 purposes of this journal entry, assume Sales Revenue totaled $116,000 and that all exp 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 ma Question 4 (40 scores) Condensed financial data of Monopoly Corporation appear below: Monopoly Corporation Comparative Balance Sheet December 31 Current, Year Pri Ye Assets

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.:

Total monthly cash distribution = 2,700 x 200,000 / 90,000 = $ 6,000.

Groucho : $ 2,700

Harpo : $ 2,100

Chicco: $ 1,200

Part c :

Account Titles	Debit	Credit
	$	$
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	116,000
	Groucho, Capital		37,800
	Harpo, Capital		29,400
	Chicco, Capital		16,800
	Operating Expenses		32,000

Part e:

Date	Account Titles	Debit	Credit
		$	$
December 31, 2015	Groucho, Capital	32,400
	Groucho, Drawings ( $ 2,700 x 12 )		32,400
December 31, 2015	Harpo, Capital	25,200
	Harpo, Drawings ( $ 2,100 x 12)		25,200
December 31, 2015	Chicco, Capital	14,400
	Chicco, Drawings ( $ 1,200 x 12)		14,400

Part f:

Marx Brothers' Partnership Statement of Partners' Equity For the year ended December 31, 2015
	Groucho	Harpo	Chicco
Investment, 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