Question

Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $68,000; Johnson conveys title to the following properties to the partnership: Book Value $ 24,000 44,000 Fair Value $ 46,000 54,000 Land Building and equipment The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized. According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula: • Boswell receives a compensation allowance of $800 per month. • All remaining profits and losses are split 60:40 to Johnson and Boswell, respectively, • Each partner can make annual cash drawings of $7,000 beginning in 2017 Net income of $20,000 is earned by the business during 2016. Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $72,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $4,000 compensation allowance per month and an annual cash drawing of $14,000. Remaining profits are now allocated: 509 Johnson Boswell Walpole 10 40 All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $46,000.

Answer 1

Edition - rewidual fronte ans ! 4 the Determine end of capital each labourse an Boswell Ending balores Johnson 92,160 wapella 2016 95840 60,160 133,310 2010 84,480 2018 154,444 | 29,120 47,642 78,794 boralisg poole of the - evol of 2016 1 of calculation phimf, "Total capital balance Boswell 6400 (800 x2) - 6400 6400 Compunction allorance 3160 13600 5440 Perrensning Income 20,000 2160 (26,000 -64ood 11,840 168,000 84000 (2) Statement of passen's capital - Dec 31 zelo Boswell Johnson Total Gening balance (68000 + Host 84600 + 54000) .. Allocation of income (cond) 11,840 8160 20,000 Drawings i Ending balance for 2016 95,840 92,160 186,000

(3) Calculation of equital Allocation Boswell Salary : 9607 (computer alieanace](sc3 X 12) Raracing lists (1160) 14fOTO -57607 balance at the end of 204 of Incentive fer Jola phusen mal pole 4,8000 57,600 (406x12) (580v) (4640) (1600) 43,360 46,000 $440 (5800) partners Capital - Dec 31 2017 yohnsen a talpole Total: 92,160 - 188,000 104.000 720010 steklement of Baswell Osning belor 95840 walide's (12800) centribution (32 481) Allocation of ९५५० Incens 2017 Drawings (Fed) - Fishing balance $4,480 for 2017 - (19200) (32erby6V 15800) 43,360 46,670 (Povo) auto (148tc) m ata (28000) 278,000 60.160 33,360 emount of sorts :- Etolal capital including levelpola conki buton]res. . - walpels.contribution = (188077 672000] x 40% - 72000

(a) calculate Capital balance at the end of 2018 Allocation of income for 2018 - Boswell Johnson Walpole . Pope Total 9,600 - 48000 7200 allowance 64,800 Remaning tuone . 162 .498 .420 120 1200 [66000-64800] 498 ... 9762 48,420 7320 66,000 comparation 21200 opening balance Adriellion Stectement of partners capital - Dec 31, 2017 Boswell phnson Walpole hope total 84,480 60,160 133,360 - 278000 (8448) (6016), (13,336) 27800 (206ee (107) (101) (16%). 498 48490 7320 66000 of Pope Allocation of ancome 9762 Drawings (7000) (17000) 47,642 (14000) 154,444 (6000) (34000) 29120 310,000 78,794