Question

The Prince-Robbins partnership has the following capital account balances on January 1, 2015:

  

Prince, Capital	$	145,000
Robbins, Capital		135,000

  

Prince is allocated 80 percent of all profits and losses with the remaining 20 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances.

On January 2, 2015, Jeffrey invests $82,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50%), Robbins (30%), and Jeffrey (20%). In 2015, the partnership reports a net income of $35,000.

  

a.	Prepare the journal entry to record Jeffrey entrance into the partnership on January 2, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the entry for goodwill allocation, during the admission of a new partner.

Record the cash received from new partner.

b.	Determine the allocation of income at the end of 2015.
	Income Allocation Prince Robbins Jeffery

Answer 1

Requirement: Calculation of Goodwill: Total Capital Actual Capital Goodwill =82000/20% =145000+135000+82000 $ $ $ 4,10,000 3,62,000 48,000 Preparation of Journal Entries 1) $ 48,000 Goodwill Prince Capital (48000*80%) Robbins Capital (48000*20%) (To Record goodwill allocation to old partners) $ $ 38,400 9,600 2) $ 82,000 Cash Jeffrey Capital (To Record the cash received from new partner) $ 82,000 Requirement: Determination of allocation of income at the end of 2015 Particulars Prince robbins jeffrey Total Net Income $ 35,000 Interest @ 10% $ 18,340$ 14,460 $ 8,200 $ -41,000 =(145000+38400*10% =(135000+9600 * 10% = 82000*10% Remaing Loss Alloted in 5:3:2 ratio $ -3,000 $ -1,800 $ -1,200 $ 6,000 Total Net Income $ 15,340 $ 12,660 $ 7,000 $ * Kindly Comment down for any clarifications/ queries and please upvote.