Reference no: EM132992424
Questions -
Q1. Jasmine Partnership began its first year of operations with the following capital balances:
J, Capital: $143,000
A, Capital: $104,000
S, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
- J was to be awarded an annual salary of $26,000 with $13,000 salary assigned to S
- Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year
- The remainder was to be assigned on a 4:3:3 basis, respectively.
- Each partner was allowed to withdraw up to $13,000 per year.
If the net loss for the first year of operations was $36,000 with net income of $42,000 in the second year. Assume also that each partner withdrew the maximum amount from the business each year.
a. How much was the share of income or loss for the first year of S?
b. How much was the balance in the capital account at the end of the second year of S?
Q2. Jane, Honey, and Nica are partners with present capital balances of $40,000, $50,000 and $20,000 respectively. The partners share profits and losses according to the following percentages: 50% for Jane, 20% for Honey, and 30% for Nica. Delia is to join the partnership upon contributing $55,000 to the partnership in exchange for a 35% interest in capital and a 20% interest in profits and losses. An appraisal of the existing partnerships' assets reveals the following: Accounts Receivable - 20,000 overvalued; Inventory - 10,000 overvalued; Land - 10,000 undervalued; Building - 15,000 undervalued.
a. How much is the capital balance of Honey in the new partnership assuming bonus method?
b. How much is the bonus of Nica in the new partnership assuming bonus method?