At the end of its first year of operations on December 31, 2020, Blossom Company's accounts...

Transcribed Image Text:

At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following. Partner Drawings Capital Art Niensted $22,500 $40,000 Greg Bolen Krista Sayler 13,500 10,000 30,000 22,000 The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions. 1. Net income is $28,000. Income is shared 6:3:1. 2. Net income is $38,000. Niensted and Bolen are given salary allowances of $14,500 and $10,000, respectively. The remainder is shared equally. 3. Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $14,800 salary allowance. The remainder is shared equally. (a) Your answer is partially correct. Prepare a schedule showing the division of net income under assumption (3) above. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).) Salary allowance Art Niensted DIVISION OF NET INCOME Greg Bolen Krista Sayler 14800 Total 14800 Interest allowance 4000 3000 2200 9200 on capital Total salaries 18800 3000 2200 24000 and interest Remaining excess/ -3600 -1800 -600 -6000 deficiency Total division of $ 15200 $ 1200 $ 1600 $ 18000 net income At the end of its first year of operations on December 31, 2020, Blossom Company's accounts show the following. Partner Drawings Capital Art Niensted $22,500 $40,000 Greg Bolen Krista Sayler 13,500 10,000 30,000 22,000 The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts. To record the division of net income for the year 2020 under each of the following independent assumptions. 1. Net income is $28,000. Income is shared 6:3:1. 2. Net income is $38,000. Niensted and Bolen are given salary allowances of $14,500 and $10,000, respectively. The remainder is shared equally. 3. Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $14,800 salary allowance. The remainder is shared equally. (a) Your answer is partially correct. Prepare a schedule showing the division of net income under assumption (3) above. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).) Salary allowance Art Niensted DIVISION OF NET INCOME Greg Bolen Krista Sayler 14800 Total 14800 Interest allowance 4000 3000 2200 9200 on capital Total salaries 18800 3000 2200 24000 and interest Remaining excess/ -3600 -1800 -600 -6000 deficiency Total division of $ 15200 $ 1200 $ 1600 $ 18000 net income