Acct240 Financial Accounting: P12-2B At the end of its first year of operations, KAT Company

Acct240 Financial Accounting
P12-2B
At the end of its first year of operations on December 31,2010, KAT Company accounts show the following
Partner Drawings Capital
H. Krik 15,000 40,000
N. Andres 10,000 25,000
S. Thabo 5,000 15,000

The capital balance represents each partner's initial capital investments. Therefore, net income or net loss for 2010 has not been closed to the partners' capital accounts.

Instructions:
a. Journalize the entry to record the division of net income for 2010 under each of the independent assumptions as shown on the next page.
1. Net income is $50,000. Income is shared 5:3:2.
2. Net income is $40,000. Kirk and Andres are given salary allowances of $15,000 and $10,000 respectively. The remainder is shared equally.
3. Net income is $37,000. Each partner is allowed interest of 10% on beginning capital balances. Kirk is given an $20,000 salary allowance. The remainder is shared equally.
b. Prepare a schedule showing the division of net income under assumption (3) above.
c. Prepare a partners' capital statement for the year under assumption (3) above.
Powered by