Reference no: EM131571912

Application Assignment

Income Sharing Among Partners, Admission of a Partner

Problem #1

Moe, Larry, and Curly makeup the MLC partnership. During 2015 they had Revenue of $250,000 and Expenses of $100,000. M, Cap $100,000; L Cap $150,000; C Cap $500,000. The partnership agreement states that Interest is 10% of their Capital Accounts and any remaining amount is split equally. Distribute the profits for 2015 under the terms below. Also Record the Appropriate Closing Journal Entry.

Problem #2

Partners Washington, Lincoln & Wilson are partners. Their Equity Accounts are $100,000, $500,000 and $750,000. Salaries are allocated at $50,000, $75,000 & $100,000. Interest is allocated on Investments at 10%. Distribute $390,000 in after tax net income AND record the appropriate Journal Entry.

Problem #3

This is based upon the same information as Problem #2. Distribute $300,000 in after tax net income and record the appropriate Journal Entry.

Problem #4

This problem has a profit distribution that exceeds the amount of the profit. Need a hint? Continue with the required distribution namely salary and interest. This will result in a negative amount. Split the negative amount among the partners. For example...let's say 2 partners have net income of $50,000 to split between them but the required distribution for salary and interest is $60,000. That means that NEGATIVE -$10,000 has to split between them. This means they will have negative -$5,000 each in the distribution. Calculate the distribution based upon the following and of course record the appropriate journal entry.

Partner A - Capital, $100,000, 10% Interest, Salary $50,000
Partner B - Capital, $200,000, 10% Interest, Salary $75,000
Net Profit = $135,000

Problem #5 Sharing Profits and Journalizing

Cosmo and Ellis are Partners with Capital Accounts of $50,000 and $75,000.

They agree to share profits by receiving Salaries of $55,000 and $45,000. Interest on Investment is 10% with any excess or deficit being split equally.

Case A: Net Income Amounts to $165,000 Case B: Net Income = $100,500

Figure the distribution for both cases about and do the journal entries.

Problem #6 Admission of a Partner

Partners A, B and C have Capital accounts for $200,000, $300,000 and $500,000. (Below are 3 separate case possibilities.)

Case A A New Partner (D) buys partner's B equity for $375,000. Record the journal entry.

Case B Partner D invests $500,000 into the partnership for 10% equity. Record the journal entry. Assume Transaction Case A did NOT happen.

Case C Partner D invests $100,000 for 20% equity in the partnership. Record the journal entry. Assume Cases A & B did NOT happen.