(a) net income of $600,000, and 7% on capital balances (b) net income of $50,000, and 5% on capital balances.
(a) net income of $600,000, and 7% on capital balances (b) net income of $50,000, and 5% on capital balances.
Chapter21: Partnerships
Section: Chapter Questions
Problem 7BCRQ
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Question
Transcribed Image Text:2. Business partners Barcelona, Monroe, and Romalia have a partnership agreement that outlines a
detailed formula for sharing profits and losses. Barcelona, Monroe and Romalia earn annual
salaries of $80,000, $70,000, and $100,000 respectively. They also earn a fixed percentage of
interest on their capital balances which are $60,000, $60,000, and $80,000 respectively. Any
remaining income is allocated using an income ratio of 30%, 30% and 40% respectively. Calculate
the net income allocation and record the journal entry under the following unrelated situations:
(a) net income of $600,000, and 7% on capital balances
(b) net income of $50,000, and 5% on capital balances.
Transcribed Image Text:Date
a)
b)
General Journal
Particulars
Debit
Page
Credit
CALCULATIONS
Scenario (a)
Balance in Capital account, January 1
Income Ratio
Net Income
Income Distribution
Salary
Interest Allowance
Net Income allocated PRIOR to ratio application
Net Income to be allocated based on income ratio
Share of income based on income ratio
Total allocation of net income
Scenario (b)
Balance in Capital account, January 1
Income Ratio
Net Income
Income Distribution
Salary
Interest Allowance
Net Income allocated PRIOR to ratio application
Net Income to be allocated based on income ratio
Share of income based on income ratio
Total allocation of net income
Barcelona Monroe Romalia
Barcelona Monroe Romalia
Total
Total
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