Question

Kimberly Payne and Arionna Maples decide to form a partnership by combining the assets of their separate businesses. Payne contributes the following assets to the partnership: cash, $24,290; accounts receivable with a face amount of $171,520 and an allowance for doubtful accounts of $4,420; merchandise inventory with a cost of $90,120; and equipment with a cost of $142,010 and accumulated depreciation of $46,810.

The partners agree that $6,170 of the accounts receivable are completely worthless and are not to be accepted by the partnership, that $4,320 is a reasonable allowance for the uncollectibility of the remaining accounts, that the merchandise inventory is to be recorded at the current market price of $100,820, and that the equipment is to be valued at $78,270.

On December 1, journalize the partnership’s entry to record Payne’s investment. Refer to the Chart of Accounts for exact wording of account titles.

On December 1, journalize the partnership’s entry to record Payne’s investment. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

Dividing Partnership Income

Tyler Hawes and Piper Albright formed a partnership, investing $60,000 and $180,000, respectively.

Determine their participation in the year's net income of $270,000 under each of the following independent assumptions:

1. No agreement concerning division of net income.
2. Divided in the ratio of original capital investment.
3. Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3.
4. Salary allowances of $38,000 and $47,000, respectively, and the balance divided equally.
5. Allowance of interest at the rate of 5% on original investments, salary allowances of $38,000 and $47,000, respectively, and the remainder divided equally.

	Hawes	Albright
(a)	$	$
(b)	$	$
(c)	$	$
(d)	$	$
(e)	$	$

Answer 1

									Accounting equation
Date	Description					Post Ref.	Debit	Credit	Assets	Liabilities	Equity
Dec 1.	Cash						24290		24290
	Accounts receivable			(171520-6170)			165350		165350
	Merchandise inventory						100820		100820
	Equipment						78270		78270
	Allowance for doubtful accounts							4320	-4320
	Kimberly payne,Capital							364410			364410
	(Capital contribution by the partner)

a.	No agreement-Share equally
					Net income	Hawes	Albright
					270000
	Share equally				270000	135000	135000
b.	Original capital investment ratio=60000:180000 or 1:3
					Net income	Hawes	Albright
					270000
	Share at 1:3					67500	202500
						270000*(1/4)	270000*(3/4)
c.					Net income	Hawes	Albright
					270000
	Interest on investments				12000	3000	9000
						(60000*5%)	(180000*5%)
	Balance of net income				258000
	Share at 2:3				258000	103200	154800
						258000*(2/5)	258000*(3/5)
	Total					106200	163800
d.					Net income	Hawes	Albright
					270000
	Salary allowance				85000	38000	47000
	Balance of net income				185000
	Share equally				185000	92500	92500
	Total					130500	139500
e.					Net income	Hawes	Albright
					270000
	Interest on investments				12000	3000	9000
						(60000*5%)	(180000*5%)
	Balance of net income				258000
	Salary allowance				85000	38000	47000
	Balance of net income				173000
	Share equally				173000	86500	86500
	Total					127500	142500
	Summary:
		Hawes	Albright
	(a)	135000	135000
	(b)	67500	202500
	c)	106200	163800
	(d)	130500	139500
	e)	127500	142500