Question

1.

Dividing Partnership Net Income

Required:

Steve Queen and Chelsy Boxer formed a partnership, dividing income as follows:

1. Annual salary allowance to Queen of $132,720.
2. Interest of 5% on each partner's capital balance on January 1.
3. Any remaining net income divided to Queen and Boxer, 1:2.

Queen and Boxer had $84,000 and $87,000, respectively, in their January 1 capital balances. Net income for the year was $237,000. How much is distributed to Queen and Boxer?

Note: Compute partnership share.
Queen: $
Boxer: $

2.

Revaluing and Contributing Assets to a Partnership

Demarco Lee invested $45,000 in the Camden & Sayler partnership for ownership equity of $45,000. Prior to the investment, equipment was revalued to a market value of $341,000 from a book value of $281,000. Kevin Camden and Chloe Sayler share net income in a 1:2 ratio.

Required:

a. Provide the journal entry for the revaluation of equipment.

For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Provide the journal entry to admit Lee.

3.

Partner Bonus

Sharpe has a capital balance of $109,000 after adjusting assets to fair market value. Van Ness contributes $63,000 to receive a 40% interest in a new partnership with Sharpe.

Determine the amount and recipient of the partner bonus.

Amount of bonus	$
Recipient of bonus

Answer 1

Ans-1-Income Distribution:-

Particulars	Queen	Boxer	Total
Beginning Inventory	$84,000	$87,000	$171,000
Net Income			$237,000
Salary allowance	$132,720		-$132,720
Interest allowance 5%	$4,200	$4,350	-$8,550
Remaining Net Income			$95,370
Balance distributed in 1:2	$31,910	$63,820	-$95,370
Partnership Share	$168,830	$68,170	0

Ans-2-a-The journal entry for the revaluation of equipment:-

S.No.	Account Titles and Explanation	Debit ($)	Credit ($)
A.	Equipment ($341,000-$281,000)	60,000
	Kevin Camden, Capital ($60,000*1/3)		20,000
	Chloe Sayler, Capital ($60,000*2/3)		40,000
	(To record the revaluation of equipment)

b-The journal entry to admit Lee:-

B.	Cash	45,000
	Demarco Lee, Capital		45,000
	(To record admission of Lee)

Ans-3-Calculating the amount of bonus and recipient of the partner as shown below:-

Particulars	Amount ($)
Sharpe's capital after adjusting to assets	$109,000
Van Ness's Contribution to receive 40% interest in new partnership	$63,000
Total capital of the new partnership	$172,000
Van Ness's equity interest in new partnership	40%
Van Ness's equity after admission	$68,800
Van Ness's Contribution	$63,000
Amount of Bonus ($68,800-$63,000)	$5,800

Thus, the amount of bonus is $5,800. Recipient of bonus is Van Ness.

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