Maurice Tutor

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Teaching Since: May 2017
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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 16 Aug 2017 My Price 11.00

Edi Thomas and George

Partnership Formation and Distribution of Income

P1. In January 2013, Edi Thomas and George Lopez agreed to produce and sell chocolate candies. Thomas contributed $480,000 in cash to the business. Lopez con- tributed the building and equipment, valued at $440,000 and $280,000, respectively. The partnership had an income of $168,000 during 2013 but was less successful during 2014, when income was only $80,000.

 

reQUIreD

1.    Prepare the journal entry to record the investment of both partners in the partnership.

2.    Determine the share of income for each partner in 2013 and 2014 under each of the following conditions:

a.    The partners agreed to share income equally.

b.    The partners failed to agree on an income-sharing arrangement.

c.    The partners agreed to share income according to the ratio of their original investments.

d.   The partners agreed to share income by allowing interest of 10 percent on their original investments and dividing the remainder equally.

e.    The partners agreed to share income by allowing salaries of $80,000 for Thomas and $56,000 for Lopez, and dividing the remainder equally.

f.     The partners agreed to share income by paying salaries of $80,000 to Thomas and $56,000 to Lopez, allowing interest of 9 percent on their original invest- ments, and dividing the remainder equally.

3.    aCCounting ConneCtion ▶ What are some of the factors that need to be consid- ered in choosing the plan of partners’ income sharing among the options shown in requirement 2?

Answers

Maurice Tutor
(5)
Status NEW Posted 16 Aug 2017 10:08 PM My Price 11.00

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