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This problem has a profit distribution that exceeds the amount of the profit. Need a hint? Continue with the required distribution namely salary and interest.
This problem has a profit distribution that exceeds the amount of the profit. Need a hint? Continue with the required distribution namely salary and interest. This will result in a negative amount. Split the negative among the partners. For example...let's say 2 partners have net income of $50,000 to split between them but Cosmo and Ellis are Partners with Capital Accounts of $50,000 and $75,000. They agree to share profits by receiving Salaries of S55,000 and S45,000. Interest on Investment is 10% with any excess or deficit being split equally. Case A: Net Income Amounts to $165,000 Case B: Net Income = $100,500 Figure the distribution for both cases about and do the journal entries. Partners A, B and C have Capital accounts for $200,000, $300,000 and $500,000. (Below are 3 separate case possibilities.) Case A A New Partner (D) buys partner's B equity for $375,000. Record the journal entry. Case B Partner I) invests $500,000 into the partnership for 10% equity. Record the journal entry. Assume Transaction Case A did NOT happen. Case C Partner D invests $100,000 for 20% equity in the partnership. Record the journal entry. Assume Cases A & did NO T happen. List the items that are usually negotiated when businesses merge
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