At the end of its first year of operations on December 31, 2010, CNU Company’s accounts show the following

The capital balance represents each partner’s initial capital investment. Therefore, net income or net loss for 2010 has not been closed to the partners’ capital accounts.

Instructions

(a) Journalize the entry to record the division of net income for the year 2010 under each of the following independent assumptions.

(1) Net income is $30,000. Income is shared 6 : 3 : 1.

(2) Net income is $37,000. Caplin and Newell are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally.

(3) Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Caplin is given a $12,000 salary allowance. The remainder is shared equally.

(b) Prepare a schedule showing the division of net income under assumption (3) above.

(c) Prepare a partners’ capital statement for the year under assumption (3) above.

Transcribed Image Text:

Partner Reese Caplin Phyllis Newell Betty Uhrich Drawings $23,000 14,000 10,000 Capital $48,000 30,000 25,000