Question

Dividing Partnership Net Income

Required:

Steve Jack and Chelsy Stevens formed a partnership, dividing income as follows:

1. Annual salary allowance to Jack of $87,360.
2. Interest of 6% on each partner's capital balance on January 1.
3. Any remaining net income divided to Jack and Stevens, 1:2.

Jack and Stevens had $63,000 and $87,000, respectively, in their January 1 capital balances. Net income for the year was $156,000. How much is distributed to Jack and Stevens?

Note: Compute partnership share.
Jack: $
Stevens: $

Revaluing and Contributing Assets to a Partnership

Demarco Lee invested $28,000 in the Camden & Sayler partnership for ownership equity of $28,000. Prior to the investment, equipment was revalued to a market value of $294,000 from a book value of $249,000. Kevin Camden and Chloe Sayler share net income in a 1:3 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.

Answer 1

1.)		Jack	Stevens	Total $
	Net income			156,000
	Less: Salary Allowance	87,360	-	87,360
	Balance			68,640
	Less: Interest Allowance @ 6% of january 1 capital	3,780	5,220	9,000
	Balance			59,640
	Less: remaining in 1:2	19,880	39,760	59,640
	Balance			-
	Partnership Share	111,020	44,980	156,000
	Partnership Share
	Jack	$ 111,020
	Stevens	$ 44,980
2.)
a.)	Account Titles	Debit $	Credit $
	Equipment (294,000 - 249,000 )	45,000
	Kevin Camden, Capital (45,000 x 1/4 )		11,250
	Chole Sayler, Capital ( 45,000 x 3/4 )		33,750
b.)	Account Titles	Debit $	Credit $
	Cash	28,000
	Demarco Lee, Capital		28,000