Question

Problem 12-02A a-c (Part Level Submission) (Video)

At the end of its first year of operations on December 31, 2020, Sheridan Company’s accounts show the following.

Partner		Drawings		Capital
Art Niensted		$23,400		$42,100
Greg Bolen		14,500		30,500
Krista Sayler		10,000		22,500

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 $38,500. Niensted and Bolen are given salary allowances of $14,500 and $10,500, respectively. The remainder is shared equally.
3.		Net income is $19,100. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,590 salary allowance. The remainder is shared equally.

Answer 1

(1)

	Art Niensted	Greg Bolen	Krista Sayler	Total
Net Income (6:3:1)	$             17,880	$            8,940	$              2,980	$ 29,800

(2)

	Art Niensted	Greg Bolen	Krista Sayler	Total
Salary allowance	$             14,500	$         10,500		$ 25,000
Remaining Net Income (1:1:1)	$               4,500	$            4,500	$              4,500	$ 13,500
Total division of net income	$             19,000	$         15,000	$              4,500	$ 38,500

(3)

	Art Niensted	Greg Bolen	Krista Sayler	Total
Salary allowance	$             15,590			$ 15,590
Interest allowance on capital	$               4,210	$            3,050	$              2,250	$    9,510
Total Salaries & interest	$             19,800	$            3,050	$              2,250	$ 25,100
Remaining deficiency	$             (2,000)	$         (2,000)	$            (2,000)	$ (6,000)
Total division of net income	$             17,800	$            1,050	$                  250	$ 19,100