Question

Instructions: Prepare the allocation of income by partners in each case. Prepare the breakdown of income in T Accounts of the partners

Susan Otero and Kendra Villas opened an advertising business as a partnership. They have the following agreements. Each case is independent of the other. You must prepare T-accounts for the capital of each partner for each case. 60 points. (15 pts each case)

Case #3 Income of $40,000
a) Salaries 15,000 each partner
b) $20,000 productivity bonus for Otero
c) They receive 15% interest on the capital invested. Otero capital is $80,000 and Villas
capital is $80,000
d) Remaining income in 2:1
e) For T-account, Villas withdrew $5,000 for personal use

Case #4 Income of $200,000
a) Salaries of $25,000 for Otero and $15,000 for Villas
b) 5,000 Villa Productivity Bonus
c) 20% productivity bonus for Otero
d) 10% interest on the invested capital. Otero capital $60,000 and Villas capital $75,000.
e) Remaining income in 45% for Otero and 55% for Villas

Answer 1

CASE 1
PARTNERS CAPITAL ACCOUNT
PARTICULAR	Susan Otero	Kendra Villas	PARTICULAR	Susan Otero	Kendra Villas
To Drawing		5000	By Balance B/d	80000	80000
To P/L Appropriation Loss	22667	11333	By P/L Appropriation (Salary) A/c	15000	15000
To Balance C/d	104333	90667	By P/L Appropriation (Bonus) A/c	20000	0
			By P/L Appropriation (Interest on Capital) A/c	12000	12000
	127000	107000		127000	107000
	0	0
PROFIT AND LOSS APPROPRIATION A/C
PARTICULAR	AMOUNT		PARTICULAR	AMOUNT
To Salary -			By Balance	40000
Susan Otero - 15000
Kendra Villas - 15000	30000		By Capital A/c
			Susan Otero - 22667
To Bonus - Susan Otero	20000		Kendra Villas - 11333	34000
To Interest on Capital
Susan Otero - 12000
Kendra Villas - 12000	24000
	74000			74000
CASE 2
PARTNERS CAPITAL ACCOUNT
PARTICULAR	Susan Otero	Kendra Villas	PARTICULAR	Susan Otero	Kendra Villas
			By Balance B/d	60000	75000
			By P/L Appropriation (Salary) A/c	25000	15000
To Balance C/d	176675	158325	By P/L Appropriation (Bonus) A/c	40000	5000
			By P/L Appropriation (Interest on Capital) A/c	6000	7500
			To P/L Appropriation	45675	55825
	176675	158325		176675	158325
	0	0
PROFIT AND LOSS APPROPRIATION A/C
PARTICULAR	AMOUNT		PARTICULAR	AMOUNT
To Salary -			By Balance	200000
Susan Otero - 25000
Kendra Villas - 15000	40000
To Bonus - Kendra Villas
Susan Otero - 40000
Kendra Villas - 5000	45000
To Interest on Capital
Susan Otero - 6000
Kendra Villas - 7500	13500
By Capital A/c
Susan Otero - 45675
Kendra Villas - 55825	101500
	200000			200000