Jim and Pam formed a partnership to open a paper company by investing $70,000 and $50,000, respectively. They agreed to share profit and losses by allowing a $5,000 annual salary allowance to Jim and a $1,500 annual salary allowance to Pam. As well, each partner is to receive an interest allowance equal to a 10% return on initial capital investments, and the balance is to be divided 70% to Jim and 30% to Pam. At the end of the first year, December 31, 2020, the Income Summary had a credit balance of $60,000. Jim withdrew $3,000 during the year, and Pam withdrew $2,500. (16 marks)
a | Share to Jim | Share to Pam | Total |
Profit/loss | $ 60,000 | ||
Allowances | |||
Salary Allowance | $ 5,000 | $ 1,500 | |
Interest Allowance (Refer : Note 1) | $ 7,000 | $ 5,000 | |
Total Allowance | $ 12,000 | $ 6,500 | $ 18,500 |
Balance of Profit | ($60,000-$18500) | $ 41,500 | |
Allocation of Remainder (Refer Note 2) | $ 29,050 | $ 12,450 | $ 41,500 |
Balance of Profit | $ - | ||
Total Share of Each Partner (Total Allowance + Share of Profit | $ 41,050 | $ 18,950 | $ 60,000 |
Note 1 | ||
It says 10% to each , on their Intial Investment | ||
A | B | C |
Partner | Initial Investment | 10% of B |
Jim | $ 70000 |
$ 7000 |
Pam | $ 50000 | $ 5000 |
Note 2 : It says after allowance & Interest remaining profit should be distbuted in ratio 0f 70% and 30% to Jim & Pam Respectively
A | B | C = B*41500 |
Partner | Ratio | Balance Profit is $41500 |
Jim | 70% | $ 29050 |
Pam | 30% | $ 12450 |
b JOUNRAL ENTERIES
Date | Account Name | Debit | Credit |
31-12-2020 | Salary Allowance Account | $ 6,500 | |
Jim's Capial Account | $ 5,000 | ||
Pam's Capital Account | $ 1,500 | ||
(Being Salary Allowance provided to Partners) | |||
31-12-2020 | Interest Allowance Account | $ 12,000 | |
Jim's Capital Account | $ 7,000 | ||
Pam's Capital Account | $ 5,000 | ||
(Being Interest on Intial Investment @ 10% provided to partners) | |||
31-12-2020 | Income Summary Account | $ 41,500 | |
Jim'sCapital Account | $ 29,050 | ||
Pam's Capital Account | $ 12,450 | ||
(Being remaining balance of Income Summary distributed among partners in ratio of 70:30) |
C. Balance of Partner's Capital Account at the end of 31, Decemeber 2020
Account | Balance of Jim's Capital Account | Balance of Pam's Capital Account | Total |
Initial Investment | $ 70,000 | $ 50,000 | $ 120,000 |
Add: Salary Allowance | $ 5,000 | $ 1,500 | $ 6,500 |
Add: Interest Allowance | $ 7,000 | $ 5,000 | $ 12,000 |
Add: Profit Share | $ 29,050 | $ 12,450 | $ 41,500 |
Less : Amount Withdrwan | $ (3,000) | $ (2,500) | $ (5,500) |
Balance at the end | $ 108,050 | $ 66,450 | $ 174,500 |
Jim and Pam formed a partnership to open a paper company by investing $70,000 and $50,000,...
On June 1, 2020, Jill Bow and Aisha Adams formed a partnership to open a gluten-free commercial bakery, contributing $283,000 cash and $366,000 of equipment, respectively. The partnership also assumed responsibility for a $43,000 note payable associated with the equipment. The partners agreed to share profits as follows: Bow is to receive an annual salary allowance of $153,000, both are to receive an annual interest allowance of 10% of their original capital investments, and any remaining profit or loss is...
14. The Ronna & Pam Partnership has earned $200.000 this year ko this year is $150.000. Pam's opening capital balance interest allowance on their opening capital balance 385,000, while Pam gets a 'salary allowance' of $35 000. Their profil YOU MUST SHOW ALL CALCULATIONS allowance on the pening capital balance is $75.000. Assume that each partner geus 00 this year. Ronna's opening capital balance for pening capital balance Also Ronna gets a 'salary allowance of Their profitto loss sharing ratio...
4. The Ronna & Pam Partnership has earned $300,00 this year is $150,000. Pam's opening capital balance is interest allowance on their opening capital balance. Also, Ron $65,000, while Pam gets a 'salary allowance of $35 YOU MUST SHOW ALL CALCULATIONS. this year. Ronna's opening capital balance for lance is $75,000. Assume that each partner gets 10% ary allowance' of $35.000. Their profit to loss sharing ratio is 50:50. e. Also, Ronna gets a 'salary allowance' of A: What is...
On June 1, 2020, Jill Bow and Aisha Adams formed a partnership to open a gluten-free commercial bakery, contributing $283,000 cash and $366,000 of equipment, respectively. The partnership also assumed responsibility for a $43,000 note payable associated with the equipment. The partners agreed to share profits as follows: Bow is to receive an annual salary allowance of $153,000, both are to receive an annual Interest allowance of 10% of their original capital Investments, and any remaining profit or loss is...
vidling Partnership Income Tyler Hawes and Piper Albright formed a partnership, investing $252,000 and $84,000, respectively. Determine their participation in the year's net income of $360,000 under each of the following independent assumptions: a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. c. Interest at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $53,000 and $73,000, respectively, and the...
On June 1, 2020, Jill Bow and Aisha Adams formed a partnership to open a gluten-free commercial bakery, contributing $298,000 cash and $396,000 of equipment, respectively. The partnership also assumed responsibility for a $58,000 note payable associated with the equipment. The partners agreed to share profits as follows: Bow is to receive an annual salary allowance of $168,000, both are to receive an annual interest allowance of 5% of their original capital investments, and any remaining profit or loss is...
Dividing Partnership Income Tyler Hawes and Plper Albright formed a partnershlp, Investing $315,000 and $105,000, respectively Determine their participation in the year's net Income of $354,000 under each of the following Independent assumptions a No agreement concerning division of net income. b Divided In the ratio of original capital Investment. C. Interest at the rate of 18% allowed on original Investments and the remainder divided in the ratio of 23. d Salary allowances of $66,000 and $90,000, respectively, and the...
Exercise 11-4 Profit allocation in a partnership LO3 Dallas and Weiss formed a partnership to manage rental properties, by investing $132,000 and $198,000, respectively. During its first year, the partnership recorded profit of $451,000. Required: Prepare calculations showing how the profit should be allocated to the partners under each of the following plans for sharing profit and losses: a. The partners falled to agree on a method of sharing profit. Share to Dallas Share to Weiss Total b. The partners...
Ramer and Knox began a partnership by investing $60,000 and $90,000, respectively. The partners agreed to share net income and loss by giving annual salary allowances of $50,000 to Ramer and $40,000 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally. (Enter all allowances as positive values. Enter losses as negative values.) Required: 1. Determine each partner's share given a first-year net income of $98,800. 2. Determine each partner's share given a first-year net loss...
che Ramer and Knox began a partnership by investing $79,000 and $109,000, respectively. The partners agreed to share net income and loss by giving annual salary allowances of $59,500 to Ramer and $47.600 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally (Enter all allowances as positive values. Enter losses as negative values.) Required: 1. Determine each partner's share given a first-year net income of $117.800. 2. Determine each partner's share given a first year...