The January 1, 2017, balance sheet of the partnership of Linda Kingston and Jeannette Allen is shown below.
Assets | Liabilities and Capital | ||
---|---|---|---|
Cash | $12,000 | Liabilities | $34,000 |
Other assets | 108,000 | Capital - Kingston | 35,600 |
Capital - Allen | 50,400 | ||
Total assets | $120,000 | Total liabilities and capital | $120,000 |
The partnership reported revenues of $48,000 and expenses of $33,000 for 2017. Neither partner withdrew funds from the partnership during the year. Kingston invested $4,800 in the firm on June 28, 2017.
(c) The partnership agreement specifies that income is divided equally after paying each partner 10 percent interest on her weighted average capital balance.
Balance at December 31, 2017 | |
---|---|
Kingston | $Answer |
Allen | $Answer |
(d) The partnership agreement specifies that Kingston and Allen receive salaries of $7,200 and $4,800, respectively, and that each partner receives 5 percent interest on her capital balance at the beginning of the year. Salary and interest allocations are to be fully implemented. Any remaining income is to be divided equally.
Balance at December 31, 2017 | |
---|---|
Kingston |
$Answer |
Allen |
$Answer |
C,
Net income for 2017
= 48000 - 33000 - (10%*35600) - 10%(50400+(4800*6/12)
=15000 - 3560 - 5280 = $6160
Balance at year end
Kingston =35600+( 6160*50%)+4800= $ 43480
Allen =50400 +(6160*50%) = $ 53480
D,
Net income for 2017 = 48000-33000-(7200+4800)-5%(86000)
=15000 - 12000 - 4300 = ($1300)
The loss should also be shared equally
Balances at year end
Kingston = 35600 +($1300) * 50%+4800
=35600+($650)+4800 $39750
Allen =50400+(($1300)*50% )= ($650)+50400 = $49750
Note; It is assumed that the above mentioned expenses are against profit only.
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