Allocate income to partners Partnership Facts: 1. John, Alice and Dan are all ge
ID: 2416746 • Letter: A
Question
Allocate income to partners
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 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.
John
Alice
Dan
Totals
Allocate income to partners
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 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.
John
Alice
Dan
Totals
Explanation / Answer
journal entry
John Alice Dan Total Allocation of salary 90000 72000 - 162000 Allocation of interest 7500 [150000*.05] 6000 [120000*.05] 12900 [258000*.05] 26400 Allocation of remaining income to partners [141000- 162000-26400= -47400 loss] in1:1:1 -15800 -15800 -15800 -47400 Total allocation 81700 62200 -2900 141000Related Questions
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