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 $13,000 $12,000

Accounts receivable 8000 6000

Office supplies 2000 800

Office equipment 30000 -

Land 30000

Accounts payable 2000 5000

Mortgage payable 18,800

Prepare journal entries 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) allocation 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

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