Question

Problem 12-02A a-c (Video) At the end of its first year of operations on December 31, 2020, Cullumber Company's accounts show the following. Partner Art Niensted Greg Bolen Krista Sayler Drawings $23,200 14,100 10,800 Capital $42,500 36,500 26,000 The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions. 1. Net income is $29,800. Income is shared 6:3:1. 2. Net income is $38,300. Niensted and Bolen are given salary allowances of $14,600 and $10,200, respectively. The remainder is shared equally. 3. Net income is $19,700. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,500 salary allowance. The remainder is shared equally.

Answer 1

Please find below table useful to compute desired results: -

D A B 1 Partner Art Niensted Greg Bolen 2 Drawings 2320014100 3 Capital 42500 36500 4 1. Net Income 5 Income Share =6/10 =3/10 6 2. Net Income 7 Niensted Salary allowance 8 Bolen Salary allowance 9 Income Share _ =1/3 =1/3 10 3. Net Income 11 Interest on capital 12 Niensted Salary allowance 13 Income Share 1=1/3 =1/3 14 DIVISION OF NET INCOME 16 Art Niensted Greg Bolen 17 Salary Allowance =D12 18 Interest on capital =B3*D11 =C3*D11 19 Total Salaries and Interest =B17+B18 =C17+C18 20 Remaining Deficiency =E20*B13 =E20*С13 21 Total Division of Net Income =B19+B20 =C19+C20 Krista Sayler 10800 26000 29800 =1/10 38300 14600 10200 =1/3 19700 =10/100 15500 =1/3 15 Krista Sayler Total =SUM(B17-D17) =D3*D11 =SUMB18-D18) =D17+D18 =E17+E18 =E20*D13 =E21-E19 =D19+D20 =D10

Credit =B24%B5 =B24*C5 =B24*D5 А B 23 Account Titles and Explanation Debit 24 1. Income Summary =D4 25 Art Niensted 26 Greg Bolen 27 Krista Sayler 28 2. Income Summary 29 Art Niensted 30 Greg Bolen Krista Sayler 32 3. Income Summary =D10 Art Niensted Greg Bolen Krista Sayler =D7+(D6-D7-D8)*B9 =D8+(D6-07-D8)*C9 I=(D6-D7-D8)*D9 33 =B21 =C21 =D21 40 41 Capital, January 1 42 Add: Net Income loss CULLUMBER COMPANY Partners' Capital Statement For the year ended December 31, 2020 Art Niensted Greg Bolen Krista Sayler Total =B3 =C3 =D3 =SUMB41:D41) =B21 =C21 =D21 =SUMB42:D42) =B41+B42 =C41+C42 =D41+D42 =E41+E42 =B2 =C2 =D2 =SUM(B44:D44) =B43-B44 =C43-C44 =D43-144 =E43-E44 43 44 Less: Drawings 45 Capital, December 31

End results would be as follows: -

B Art Niensted 23,200 42,500 Greg Bolen 14.100 36,500 60% 30% A 1 Partner 2 Drawings 3 Capital 4 1. Net Income 5 Income Share 6 2. Net Income 7 Niensted Salary allowance 8 Bolen Salary allowance 9 Income Share 10 3. Net Income 11 Interest on capital 12 Niensted Salary allowance 13 Income Share D Krista Sayler 10.800 26.000 29.800 10% 38,300 14,600 10.200 33% 19,700 10% 15.500 33% 1 33% 33% 33% 33% 14 16 Krista Sayler 15 DIVISION OF NET INCOME Art Niensted Greg Bolen 17 Salary Allowance 15,500 18 Interest on capital 4,250 3.650 19 Total Salaries and Interest 19.750 3,650 20 Remaining Deficiency (2.100) (2.100) 21 Total Division of Net Income 17.650 1.550 22 2,600 2.600 (2.100) 500 Total 15,500 10,500 26,000 (6.300) 19.700

B Debit 29.800 Credit 17.880 8.940 2.980 38,300 А 23 Account Titles and Explanation 24 1. Income Summary Art Niensted 26 Greg Bolen Krista Sayler 28 2. Income Summary 29 Art Niensted 30 Greg Bolen Krista Sayler 32 3. Income Summary Art Niensted Greg Bolen Krista Sayler 19.100 14.700 4,500 19,700 33 17,650 1,550 500 40 41 Capital, January 1 42 Add: Net Income loss 43 44 Less: Drawings 45 Capital, December 31 CULLUMBER COMPANY Partners' Capital Statement For the year ended December 31, 2020 Art Niensted Greg Bolen Krista Sayler 42,500 36,500 26,000 17,650 1,550 500 60.150 38,050 26,500 23,200 14,100 10.800 36,950 23,950 15,700 Total 105.000 19.700 124,700 48,100 76,600