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Allocate income to partners
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:
8. The net income before any allocations are made is $141,000.
9. Assume that no money is distributed at this time but earnings are allocated to partner capital accounts.
Allocate the net income to partners based on the above partnership terms and prepare allocation journal entries.
There are 2 problems this week. Click on the tabs at the bottom of the spreadsheet to view each problem.
Prepare the journal entries for the five following transactions. Use dates but descriptions are not required.
1. On 10/1/15, Equipment was purchased for $10,000 cash down payment
and a 10% per annum promissory note of $40,000.
2. On 12/31/15 (fiscal year end), please record an adjusting entry to accrue interest.
3. On June 30, 2016 the note was paid in full. No interest has been accrued in 2016 yet.
4. There are 10,000 shares of $2 par common stock outstanding.
The board of directors declares a 15 cent dividend per share on May 15, 2016.
5. On June 30, the above declared dividend is paid
to holders of record as of June 20, 2016.