|Application Assignment #4|
|Income Sharing Among Partners, Admission of a Partner|
|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 .|
|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.|
|This is based upon the same information as Problem #2. Distribute $300,000 in after tax net income and record the appropriate Journal Entry.|
|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.