Reference no: EM133103566

Questions -

Scenario 1: The partnership agreement of Gibs and Reed Landscaping provides an $18,000 salary allowance to Willis Gibs and a $24,000 salary allowance to George Reed. Both partners are given 10% interest on their capital balances at the beginning of the year. The beginning capital balance for Gibs was $41,700 and for Reed, $37,300. Any remaining income or loss is shared equally.

Assume that the business had revenues of $130,000 and expenses of $74,000 resulting in net income of $56,000 during its first year of operations. Calculate the net income distributed to each partner, and then prepare the journal entries to reflect the distribution assuming that each partner withdrew their allowance amount only.

Scenario 2: Assume that the business formed by Gibs and Reed had revenues of $130,000 and expenses of $90,000 resulting in net income of $40,000 during its first year of operations. Calculate the net income distributed to each partner, and then prepare the journal entries to reflect the distribution assuming that each partner withdrew their allowance amount only.

Scenario 3: Assume that the Gibs/Reed partnership agreement has the following provisions: 1. Salary allowances are $20,000 for Gibs and $30,000 for Reed. 2. No interest is given on the partners' capital balances. 3. Any income/loss greater than the salary allowances is divided using a 2:3 ratio. Revenues of $130,000 and expenses of $62,000 resulted in net income for the first year of operations of $68,000. Calculate the net income distributed to each partner, and then prepare the journal entries to reflect the distribution assuming that each partner withdrew their allowance amount only.