Thomson and Turner formed a partnership by investing $110 000 and $90 000 respectively. The partnership had
Question:
Thomson and Turner formed a partnership by investing $110 000 and $90 000 respectively. The partnership had a final profit of $72 000 in the first year.
Required
A. Prepare the journal entries to record the allocation of profit under each of the following assumptions, using method 1 procedures:
1. Thomson and Turner agree to a 60:40 sharing of profits.
2. The partners agree to share profits in the ratio of their original capital investments.
3. The partners agree to recognise a $10 000 per year salary allowance to Thomson and a $8000 per year salary allowance to Turner. Each partner is entitled to 8% interest on her original investment, and any remaining profit is to be shared equally.
B. Repeat requirement A.3 above assuming the partnership has a profit of $30 000 for the first year.
PartnershipA legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Step by Step Answer:
A 1 2 3 Profit or Loss Summary 72 000 72 000 72 000 Profit Distribution 72 000 72 000 72 000 Profit ...View the full answer
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
