Albin, Peters, and Ramsey invested $164,000, $98,400, and $65,600, respectively, in a partnership. During its first calendar year, the firm earned $270,000. Required Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $270,000 net income under each separate assumption. 1. The partners did not agree on a plan and therefore share income equally. 2. The partners agreed to share income and loss in the ratio of their beginning capital investments. 3. The partners agreed to share income and loss by providing annual salary allowances of $96,000 to Albin, $72,000 to Peters, and $50,000 to Ramsey; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally.
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.
Albin, Peters, and Ramsey invested $164,000, $98,400, and $65,600, respectively, in a partnership. During
its first calendar year, the firm earned $270,000.
Required
Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to
allocate the $270,000 net income under each separate assumption.
1. The partners did not agree on a plan and therefore share income equally.
2. The partners agreed to share income and loss in the ratio of their beginning capital investments.
3. The partners agreed to share income and loss by providing annual salary allowances of $96,000 to
Albin, $72,000 to Peters, and $50,000 to Ramsey; granting 10% interest on the partners’ beginning
capital investments; and sharing the remainder equally.
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