Question

Q-2: Jahangir, Zain, and Zohaib invested Rs.40,000, Rs.56,000, and Rs.64,000, respectively, in a partnership.
During its first calendar year, the firm earned Rs.124,500.
Required:
Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate
the Rs.124,500 net income to the partners under each of the following separate assumptions: The partners (1)
have no agreement on the method of sharing income and loss; (2) agreed to share income and loss in the ratio of
their beginning capital investments; and (3) agreed to share income and loss by providing annual salary
allowances of Rs.33,000 to Jahangir, Rs.28,000 to Zain, and Rs.40,000 to Zohaib; granting 10% interest on the
partners’ beginning capital investments; and sharing the remainder equally.
Q-3: At each calendar year-end, Cabool Supply Co. uses the percent of accounts receivable method to estimate
bad debts. On December 31, 2011, it has outstanding accounts receivable of Rs. 53,000, and it estimates that 4%
will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2011 under the
assumption that the Allowance for Doubtful Accounts has (a) a Rs. 915 credit balance before the adjustment
and (b) a Rs. 1,332 debit balance before the adjustment.

Answer 1

Solution: