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The partnership of Magda and Sue shares profits and losses in a 50:50 ratio after Mary receives a $7,000 salary and Sue receives a $6,500 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is: A. $10,000 B. $5,000 C. ($12,000) In addition, show the resulting entries to each partner’s capital account.

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 15, Problem 1PB
Textbook Problem
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The partnership of Magda and Sue shares profits and losses in a 50:50 ratio after Mary receives a $7,000 salary and Sue receives a $6,500 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is:

A. $10,000

B. $5,000

C. ($12,000)

In addition, show the resulting entries to each partner’s capital account.

To determine

Concept introduction:

Journal Entry: It helps company or any business to record the transaction in double entry system. Every transaction has two effects one is debit and another is credit.

Partnership: Two or more person start a business in which they share profit or loss in agreed ratio and work on behalf of each other.

To calculate:

Schedule of distribution of partners profit or loss.

Explanation of Solution

Schedule Showing distribution of profit
Particulars Case 1 Case 2 Case 3
Profit or Loss 10000 5000 -12000
Less: Salary of Both Partner 13500 13500 13500
Total Profit -3500 -8500 -25500
Profit of 1st partner -1750 -4250 -12750
Profit of 2nd partner -1750 -4250 -12750

The above profit is distributed in partners in ratio 50:50.

Salary of partner= 7000+ 6500= 13500

Case 1

Partner's Capital Account
Particulars Magda Sue Particulars Magda Sue
By Bal B/d 0 0
By Profit & Loss -1750 -1750
By Salary 7000 6500
To Bal c/d 5250 4750
7000 6500 7000 6500
Case 2
...

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Chapter 15 Solutions

Principles of Accounting Volume 1
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