Question

11-1B

CHAPTER 11 Partnerships ALTERNATE PROBLEMS Problem 11-1B Methods of allocating partnership profit LO3 Xcel CHECK FIGURE: C. Dr. Lister, Capital: $6,000 Phung, Moier, and Lister invested $130,000, $150,000, and $120,000, respectively, into an organic farm to res- taurant distribution business. During its first year, the firm earned $25,000. Required Prepare entries to close the firm's Income Summary account as of December 31 and to allocate the profit to the partners under each of the following assumptions. a. The partners did not specify any special method of sharing profit. b. The partners agreed to share profit and losses in the ratio of their beginning investments. c. The partners agreed to share profit by providing annual salary allowances of $75,000 to Phung, $40,000 to Moier, and $40,000 to Lister, allowing 20% interest on the partners' beginning investments, and sharing the remainder equally. Problem 11-2B Allocating partnership profits and losses; sequential years LO3 excel CHECK FIGURES: d. Year 1: Bosch: $(25,750); Gilbert: $110,750; d. Year 2: Bosch: $190,750); Gilbert: $45,750; d. Year 3: Bosch: $105,750; Gilbert: $242,250 of forming a golf course equipment maintenance company. Bosch will

Answer 1

Phung, Moier and Lister Journal Retained Earnings A/c Dr. To Phung Capital A/C To Moier Capital A/C To Lister Capital A/C Amount ($) Amount ($) 25,000 8,333 8,333 8,334 Notes: When profit sharing ratio is not specified, then it will be shared equally among the partners. Firm's Profit Profit sharing ratio $25,000 1:1:1 Share to Phung Moier Lister $8,333 $8,333 $8,334 Journal Retained Earnings A/c Dr. To Phung Capital A/C To Moier Capital A/C To Lister Capital A/C Amount ($) Amount ($) 25,000 8,125 9,375 7,500 Notes: Firm's Profit Profit sharing ratio $25,000 130000 : 150000 : 120000 = 13:15:12 Share to Phung Moier Lister $8,125 $9,375 $7,500 Journal Phung Capital A/C Moier Capital A/C Lister Capital A/C To Retained earnings A/c Amount ($) Amount ($) 70,000 70,000 70,000 210,000 Notes: Income Statement $ $ Explanation Net profit b/f $ 25,000 26,000 30,000 24,000 80,000 Less : Interest on capital Phung (20% * 130000) Moier (20% * 150000) Lister (20% * 120000) Salary: Phung Moier Lister Loss to partners 75,000 40,000 40,000 155,000 (235,000) (210,000) Partner's share Phung (1/3) Moier (1/3) Lister (1/3) (70,000) (70,000) (70,000) (210,000)