Question

Syawla and Reven began a partnership by investing $120,000 and $230,000, respectively. During its first year ended Dec 31, 2016, the partnership had a $99,000 net loss. The partners have agreed to share income and loss by granting a $12,000 per month salary allowance to Syawla, a $6,000 per month salary allowance to Reven, 10% interest on their initial capital investments, and the remaining balance shared according to their initial capital balances. Required: Prepare calculations showing how the $99,000 loss should be allocated to the partners. Hint: Consider a table like the one below. Excel will make your work very easy

	SYAWLA	REVEN	TOTAL	BALANCE
Net Income (loss)
Interest Allowances
Salary Allowances
Share of Balance
Total

2. Prepare a journal entry to record the allocation from your calculations above

Answer 1

1.

Calculations :

Interest allowances :

Syawla - $120,000 X 10% = $12,000
Reven - $230,000 X 10% = $23,000

Salary allowances are given : Syawla - $12,000 and Reven - $6,000

Share of balance :

Syawla - $152,000 X $120,000 / $350,000 = $52,114
Reven - $152,000 X $230,000 / $350,000 = $99,886

Total Capital to be allocated :

Syawla = $12,000 + $12,000 - $52,114 = $28,114
Reven = $23,000 + $6,000 - $99,886 = $70,886

2.