E12: Chapter 12 Accounting for Partnerships (10 Points)

Peter, Paul and Mary are partners in Puff Co. with capital balances and an income/loss sharing ratio of:

Partner	Capital	I/L
Peter	$ 40,000	2
Paul	$100,000	3
Mary	$ 60,000	5
Total	$200,000	10

Partnership income for 2015 is $300,000. Partners are given credit for interest of 10% on their beginning Capital balances. They are also credited with a salary allocation of:

Partner	Salary
Peter	$ 25,000
Paul	$ 20,000
Mary	$ 35,000
Total	$ 80,000

The remainder of income is allocated on the basis of the income/loss sharing ratio. The following table shows the allocation of the $300,000 of net income to the partners.

I/L Ratio	20%	30%	50%	100%	Balance
	Peter	Paul	Mary	Total	To Allocate
Income					$300,000
Interest 10%	$4,000	$10,000	$ 6,000	$20,000	$280,000
Salaries	$25,000	$20,000	$ 35,000	$80,000	$200,000
Bal. 2:3:5	$40,000	$60,000	$100,000	$200,000	$ 0
Total	$69,000	$90,000	$141,000	$300,000

Journalize and post the entry needed to record the allocation of net income to the partners capital accounts. Remember to use the PR columns in both the General Journal and the General Ledger.

General Journal

2015				Page 12
Date	Account Titles and Explanation	PR	Debit	Credit

Partial General Ledger

			Income Summary	ACCT	900
Date					Credit
2015	Explanation	PR	Debit	Credit	Balance
12/31	Close Revenues	G12		800,000	800,000
12/31	Close Expenses	G12	500,000		300,000

			Peter, Capital	ACCT	310
Date					Credit
2015	Explanation	PR	Debit	Credit	Balance
12/31	Balance				40,000

			Paul, Capital	ACCT	320
Date					Credit
2015	Explanation	PR	Debit	Credit	Balance
12/31	Balance				100,000

			Mary, Capital	ACCT	330
Date					Credit
2015	Explanation	PR	Debit	Credit	Balance
12/31					60,000