Reference no: EM132786853

On January 1, 2019, Jolly and Bee formed a partnership by contributing cash of ?810,000 and ?540,000, respectively. On February 1, 2019, Partner Jolly contributed additional ?279,000 cash to the partnership and on August 1, 2019 Partner Jolly made a permanent withdrawal of ?135,000. On May 1, 2019, Partner Bee contributed machinery with a fair market value of ?180,000 and a net book value of ?150,000 when contributed. On November 1, 2019 Partner Bee contributed an additional ?90,000 cash to the partnership both partners withdrew one-fourth of their salary allowances in 2019.

The partnership reported a net income of ?514,800 in 2019 and the profit and loss agreement are as follows:

a. Interest at 6% is allowed on average capital balances;
b. Salaries of ?5,400 per month to each partner;
c. Bonus to Jolly of 10% of net income after interest, salaries, and bonus; and
d. Bonus to be divided in the ratio of 6:4 to Jolly and Bee, respectively

problem 1: What is the net income that will be allocated to the partners:

a. Jolly, ?320,000 and Bee, ?252,000.
b. Jolly, ?360,000 and Bee, ?212,000.
c. Jolly, ?340,000 and Bee, ?232,000.
d. Jolly, ?306,000 and Bee, ?208,000.

problem 2: What is the capital balances of the partners at December 31, 2019:

a. Jolly, ?1,234,800 and Bee, ?1,002,600.
b. Jolly, ?1,102,000 and Bee, ?1,372,000.
c. Jolly, ?1,376,000 and Bee, ?898,000.
d. Jolly, ?1,366,000 and Bee, ?1,108,000.

Assume the partners have decided instead to report partners' interests and salaries as operating expenses and modified its P&L agreement as follows: (a) Bonus to Jolly of 10% of the net income after bonus and (b) balance to be divided in the ratio of 6:4 to Jolly and Bee, respectively.

problem 3: What is the capital balances of the partners at December 31, 2019:

a. Jolly, ?1,360,000 and Bee, ?1,114,000.
b. Jolly, ?1,234,000 and Bee, ?1,002,600.
c. Jolly, ?1,366,600 and Bee, ?1,108,000.
d. Jolly, ?1,376,000 and Bee, ?898,000