Reference no: EM132494932

Question - A partnership began its first year of operations in 2020 with the following capital balances:

Young, Capital: 228000

Eaton, Capital: 166000

Thurman, Capital: 228000

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

Young was to be awarded an annual salary of $41,000, and $20,000 salary assigned to Thurman.

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 5:2:3 basis, respectively.

Each partner was allowed to withdraw up to $18,000 per year.

The net loss for the first year of operations, 2020, was ($41,600), and net income of $83,200 in the second year, 2021. Each partner withdrew the maximum amount from the business each year.

On Jan 1, 2022, the partnership sold a 20% interest to Denton for $145,000 cash. This money was contributed to the business.

Required -

A. Prepare journal entries for the partnership on Dec 31, 2021.

B. Assuming the bonus method is used, prepare journal entries for the partnership on Jan 1, 2022.