How should the money be distributed

Assignment Help Managerial Accounting

Reference no: EM13827975

		Angel Investor Associates
		Statement of Partnership Equity
		For the Year Ended December 31, 2014
	Dennis Overton, Capital	Ben Testerman, Capital	Randy Campbell, Capital	Total Partnership Capital
Partnership capital, January 1, 2014	$180,000	$120,000	$300,000
Admission of Randy Campbell	0	0	$75,000	$75,000
Salary allowance	40000			40000
Remaining income
Less: Partner withdrawals
Partnership capital, December 31, 2014

Partner Bonuses, Statement of Partners' Equity

The partnership of Angel Investor Associates began operations on January 1, 2014, with contributions from two partners as follows:

Dennis Overton $180,000

Ben Testerman 120,000

The following additional partner transactions took place during the year:

1. In early January, Randy Campbell is admitted to the partnership by contributing $75,000 cash for a 20% interest.

2. Net income of $150,000 was earned in 2014. In addition, Dennis Overton received a salary allowance of $40,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Campbell.

3. The partners' withdrawals are equal to half of the increase in their capital balances from salary allowance and income.

Distribution of Cash Upon Liquidation

Bray, Lincoln, and Mapes arranged to import and sell orchid corsages for a university dance. They agreed to share equally the net income or net loss of the venture. Bray and Lincoln advanced $225 and $300 of their own respective funds to pay for advertising and other expenses. After collecting for all sales and paying creditors, the partnership has $1,500 in cash.

Use the minus sign to indicate any deficiency for the capital accounts.

a. How should the money be distributed?

	Bray	Lincoln	Mapes	Total
Capital balances and cash distribution $	550	625	325	1500

b. Assuming that the partnership has only $300 instead of $1,500, do any of the three partners have a capital deficiency?

If so, how much?

	Bray	Lincoln	Mapes	1
Capital balances and cash distribution $

Dividing Partnership Income

Nicole Murphy and Ashley Drake formed a partnership, investing $270,000 and $90,000, respectively.

Determine their participation in the year's net income of $350,000 under each of the following independent assumptions:

a. No agreement concerning division of net income.

b. Divided in the ratio of original capital investment.

c. Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3.

d. Salary allowances of $40,000 and $50,000, respectively, and the balance divided equally.

e. Allowance of interest at the rate of 5% on original investments, salary allowances of $40,000 and $50,000, respectively, and the remainder divided equally.

Reference no: EM13827975

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