A The Prince-Robbins partnership has the following capital account balances on January 1, 2018: Prince, Capital $70,000 Robbins, Capital 60,000 Prince is allocated 80 percent of all profits and losses with the remaining 20 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances. On January 2, 2018, Jeffrey invests $37,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $15,000.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
- A The Prince-Robbins partnership has the following capital account balances on January 1, 2018:
Prince, Capital $70,000
Robbins, Capital 60,000
Prince is allocated 80 percent of all
On January 2, 2018, Jeffrey invests $37,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the
- Prepare the
journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018. - Determine the allocation of income at the end of 2018.
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