Question

PROBLEM 15-1 Profit Allocation

Day and Night formed an accounting partnership in 2014. Capital transactions for Day and Night during 2014 are

as follows:

Date Transaction Amount

Day

1/1 Beginning balance $75,000

4/1 Withdrawal 18,750

6/1 Investment 37,500

11/1 Investment 18,750

Night

1/1 Beginning balance $37,500

7/1 Investment 18,750

10/1 Withdrawal 9,375

Partnership net income for the year ended December 31, 2014; is $68,400 before considering salaries or interest.

Required:

Determine the amount of profit that is to be allocated to Day and Night in accordance with each of the following

independent profit-sharing agreements:

1. Day and Night failed to provide a profit-sharing arrangement in the articles of partnership and fail to compromise

on an agreement.

2. Net income is to be allocated 60% to Day and 40% to Night.

3. Net income is to be allocated in the ratio of ending capital balances.

4. Net income is to be allocated in the ratio of average capital balances.

5. Interest of 15% is to be granted on average capital balances, salaries of $15,000 and $8,250 are to be allocated

to Day and Night, respectively, and the remainder is to be divided equally.

Please can you help me with Question number #5. Thank you.

Answer 1

Answer An accounting partnership in 2014 1101120144 - Begiming balance Day = 75000 Begining balance Night - 31500 4/01/2011; 3) with drawal say = 18.750 C with drawal nighe - to 101/2014 y with drawit han with drawal Night = 9375 06101.2014 - Investment Day 737500 Investment Night orloi2014 3). In vestment Day = Investment Night. -78750

10/01/2014 ) Investment Day Investment Night : 9375 :11 101/2014 3) Investment Day 18750 Investment Night Ending capital Day = 1, 12.500 Endking capitell Night = 56250 Average capital Day = Q3 750 Average capital Night: 26875 Profit = 68400 Day =60% Night = 40% income allocated 60% 40% Net income allocated Day = 41,040 Net income allocated Night = 27 360 © Net

>) LIQUO + 27360 = 68400 Ending Capital Ending capital day = 112.500 Ending Capital Night = 56,250 ÿ Net income on ending Capital Day = 45 600 Nel income on ending Capital Night = 22.800 45 600t 22.800 = 68,400 A verage capital day = 93 750 Average capital Night - 46875 ③. Net income on Averag capital. Day= 45600 Nele income on Average capital Night = 22,800

->) 45 000 +22800 = 68400 @ Interest 18% 14063 Aay Mg: 7031 = 21094 is Day Night =8,250 23250 Sakeries 12.028 Day Night : 12028 24056 111,091 27309 68400