ACCT 220 Week 7 Problems Solutions

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ACCT 220 Week 7 Problems Solutions
               
Problem 1:              
Partnership Facts:              
1. Mary and Bob are both general partners of a partnership.              
2. Mary invested $225,000 in the partnership.              
3. Bob invested $150,000 in the partnership.              
4. Income is allocated based on the investment of each partner relative to the total investment of both partners.        
5. The net income to allocate is $182,000.              
6. Assume that no funds have been distributed this year and that they will not be distributed now.  Prepare an entry to allocate income to the partner capital accounts.
               
Allocate the net income to partners based on the above partnership terms and prepare allocation journal entries.      
               
Problem 2:              
Partnership Facts:              
1. John, Alice and Dan are all general partners of a partnership.            
2. John is the CEO of the partnership and is allocated a salary of $90,000 per year.          
3. Alice is the CFO of the partnership and is allocated a salary of $72,000 per year.          
4. Dan is not active in the partnership and is not allocated any salary.            
5. All partners are allocated an interest credit from earnings of 5% of their capital account balance before any allocations.      
6. The remaining profit or loss after the above allocations is split evenly three ways.          
7. Capital account balance before allocations are as follows:              
     John $150,000.              
     Alice $120,000.              
     Dan $258,000.              
8. The net income before any allocations are made is $141,000.            
9. Assume that no funds have been distributed this year and that they will not be distributed now.  Prepare an entry to allocate income to the partner capital accounts.
               
Allocate the net income to partners based on the above partnership terms and prepare allocation journal entries.      
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