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Tutorial 1

The document contains examples and solutions for journal entries and income allocation for various partnership investment and earnings scenarios.

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bolaemil20
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22 views4 pages

Tutorial 1

The document contains examples and solutions for journal entries and income allocation for various partnership investment and earnings scenarios.

Uploaded by

bolaemil20
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Tutorial 1

1- A capital contribution of LE 180,000 was made by Ahmed in the form of: cash
LE 30,000, accounts receivable LE 50,000, inventory LE 100,000, and accounts
payable LE 30,000. A capital contribution of LE 210,000 was made by
Mohamed in the form of: cash LE 10,000, inventory LE 50,000, building LE
100,000, land LE 50,000, accounts payable LE 60,000.
Record the journal entry to represent the investments made by each partner.

Solution

Cash 30,000
Accounts receivable 50,000
Inventory 100,000
Accounts payable 30,000
Ahmed capital 150,000
To record the investment made by Ahmed in the partnership

Cash 10,000
Inventory 50,000
Building 100,000
Land 50,000
Accounts payable 60,000
Mohamed capital 150,000
To record the investment made by Mohamed in the partnership

2- Charles contributes $10,000 in cash and a building with a book value of


$40,000 and fair market value of $ 50,000 to the Charles and Dean
Partnership. What is the balance of Charles’ Capital account in the
partnership?

Solution
Cash 10,000
Building 50,000
Charles Capital 60,000
Initial investment of Charles in Charles and Dean
3- Bob contributes cash of $12,000, and Kim contributes office equipment that
costs $10,000 but is valued at $8000 to the formation of a new partnership.
Record the above transaction.

Solution
Cash 12,000
Bob capital 12,000
Initial investment of Bob in Bob and Kim partnership
Equipment 8,000
Kim capital 8,000
Initial investment of Kim in Bob and Kim partnership

4- During the first year, The Bob and Kim partnership earned an income of
$5000. Bob contributed cash of $12000, and Kim contributed office
equipment that costs $10000, but is valued at $8000 to the formation of a
new partnership. Assume the partners agree to share income and losses in
the ratio of the beginning balances of their capital accounts. How much
income should be transferred to each capital account?

Solution

Beginning Capital Balance Ratio


Bob 12,000 12,000/20,000=0.6
0.6x100=60%
Kim 8,000 8,000/20,000=0.4
0.4x100=40%
20,000

Income distribution
Bob 5,000x60/100=3,000 3,000
Kim 5,000x40/100=2,000 2,000
5,000

5- Sue and Ari share income and losses in their partnership in a 3:2 ratio. The
firm net income for the current year is $80,000.

Record the distribution for income for the year to the partner’s capital accounts.

Solution

How the distribution of income would be recorded in the journal.

Sue (80,000 x 3/5) 48000


Ari (80,000 x 2/5) 32000
Net income 80,000

Income summary 80,000


Sue capital 48000
Ari capital 32000
Distribution for income for the year to the partner’s capital accounts.

6- Kathy and Roger share income in their partnership in a 2:4 ratio. Kathy and
Roger receive salaries of $6000 and $10,000 respectively. How would they
share a net income of $22000 before salaries?

Solution

Before Salaries
Katy 22,000 x 2/6 7333.3
Roger 22,000 x 4/6 14666.6

7- During the first year, The Bob and Kim partnership earned an income of
$5000. Assume the partners agree to share income and losses by figuring
interest on the beginning capital balances at 10 percent, and dividing the
remainder equally. How much income (or loss) should be transferred to each
capital account?

Solution

Bob Kim Income distribution


Total income 5,000
distributed
Salaries distributed
Bob (12000 x 10/100) ---
= 1,200
Kim --- (8000 x 10/100) (2,000)
= 800
Remaining income 3,000
after interest
Equal Distribution
of remaining
income
Bob (3000 x 50/100) ---
= 1,500
Kim --- (3000 x 50/100) (3,000)
= 1,500
Remaining income ---
Income of partners 2,700 2,300 5,000

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