1 A and B form the AB partnership. According to the agreement, A contributed $70,000 in cash while B contributed $80,000. Make the journal entry to form the partnership under the following assumptions:

a) The agreement was silent about allocating capital balances.

b) The agreement specified that capital balances will be allocated equally and the bonus method will be used.

c) The agreement specified that capital balances will be allocated equally and the goodwill method will be used.

2 Using the information from question #la above, the partners in the AB partnership agreed that profits and losses will be shared as follows Salary: A $65,000 B $35,000 Interest: Partners get 10% interest on beginning capital balance Bonus: Partner A gets a bonus of 15% of net income generated Remaining profit or loss shared equally Assume that after the first year of operation, the AB partnership generated:

i) Net income $150,000

ii) Net income $70,000

iii) Net loss ($75,000)

a) For each of the income/ loss amounts above, determine the partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

i) Net income $150,000

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

ii) Net income $70,000

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

iii) Net loss ($75,000)

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

3 Tom and Julie formed a management consulting pannership on January 1, 2014. The fair value of the net assets invested by each partner follows: Tom Julie Cash $ 12,000 13,000 $ Accounts receivable 8,000 6,000 Office supplies 2,000 800 Office equipment 30,000 - Land 30,000 Accounts payable 2,000 5,000 Mortgage payable 18,800 Prepare journal enlries to record the initial investment in the partnership under the following assumptions:

a) The agreement was silent about allocating capital balances.

b) The agreement specified that capital balances will be allocated equally and the bonus method will be used.

c) The agreement specified that capital balances will be allocated equally and the goodwill method will be used.

4 Jones and Thompson form a partnership and agree to allocate income equally after recognition of 10% interest on beginning capital balances and monthly salary allowances of $2,000 to Jones and $1,500 to Thompson. Capital balances on January 1 were as follows: Jones 40,000 $ Thompson 30,000 $ Required: Calculate the net income (loss) allocalion to each partner under each of the following independent situations. Prepare the end of year closing entries. Determine the ending capital balances for each partner.

i) Net income $99,500

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

ii) Net income $38,300

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

iii) Net income $15,100

a) Partners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner