Question

103. Cox, North, and Lee form a partnership. Cox contributes $204,000, North contributes $170,000, and Lee contributes $306,000. Their partnership agreement calls for a 6% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $154,800 for its first year, what amount of income is credited to North's capital account?

103B. Farmer and Taylor formed a partnership with capital contributions of $250,000 and $300,000, respectively. Their partnership agreement calls for Farmer to receive a $80,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $195,000, then Farmer and Taylor's respective shares are:

103C. Jeffreys Company reports depreciation expense of $58,000 for Year 2. Also, equipment costing $194,000 was sold for a $11,800 loss in Year 2. The following selected information is available for Jeffreys Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

At December 31	Year 2			Year 1
Equipment	$	700,000		$	894,000
Accumulated Depreciation-Equipment		500,000			590,000

Answer 1

103)	Income for the year	$     1,54,800
	Less: Interest on capital balances = 6%*(204000+170000+306000) =	$         40,800
	Balance to be distributed equally	$     1,14,000
	Interest credited to North's capital account = 6%*170000 =	$         10,200
	1/3rd share of profits after charging interest on partners' capital balances = 114000/3 =	$         38,000
	Amount of income credited to North's capital account	$         48,200
103B)
		Farmer	Taylor	Total
	Net income for the year			$     1,95,000
	Less: Salary payable to Farmer	$         80,000	$                  -	$       -80,000
	Balance to be distributed equally			$     1,15,000
	Balance income distributed	$         57,500	$        57,500	$   -1,15,000
	Share of the partners	$     1,37,500	$        57,500	$                  -
103C)	Calculation of accumulated depreciation of the equipment that was sold during the year:
	Beginning balance of accumulated depreciation+Depreciation expense of the year-Accumulated depreciation of the sold equipment withdrawn = Ending balance of accumulated depreciation
	Substituting values in the above equation, we have:
	590000+58000-Accu. Depn withdrawn = 500000
	Accumulated depreciation withdrawn = 590000+58000-500000 =	$     1,48,000
	Book value of the sold equipment = 194000-148000 =	$         46,000
	Less: Loss on sale	$         11,800
	Cash received from sale	$         34,200