Answered: Prepare a journal entry to distribute…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter19: Accounting For Partnerships

Section: Chapter Questions

Problem 3SEB

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Question

The partnership contract of Robert Florence and Karen Partnership provided for the sharing of net income and losses as follows:
A) Salaries of $30,000 to Robert, $28,000 to Florence and $26,000 to Karen.
B) Interest of 10% a year on average capital balances.
C) Any residual income or loss in the ration of 3:5:2 to Robert, Florence, and Karen respectively.

The net income for the year is $140,000. The average capital balances were $60,000 for Robert, $40,000 for Florence and $100,000 for Karen.

Prepare a journal entry to distribute the profit. Show details of the calculation in the space provided.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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