Coburn (beginning capital, $56,400) and Webb (beginning capital $87,600) are par
ID: 2415692 • Letter: C
Question
Coburn (beginning capital, $56,400) and Webb (beginning capital $87,600) are partners. During 2014, the partnership earned net income of $66,600, and Coburn made drawings of $17,780 while Webb made drawings of $25,450. Assume the partnership income-sharing agreement calls for income to be divided 40% to Coburn and 60% to Webb. Prepare the journal entry to record the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Assume the partnership income-sharing agreement calls for income to be divided with a salary of $30,300 to Coburn and $25,100 to Webb, with the remainder divided 40% to Coburn and 60% to Webb. Prepare the journal entry to record the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Assume the partnership income-sharing agreement calls for income to be divided with a salary of $40,700 to Coburn and $35,600 to Webb, interest of 12% on beginning capital, and the remainder divided 50%-50%. Prepare the journal entry to record the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Compute the partners ending capital balances under the assumption in part (c) above.Explanation / Answer
Journal Entries:
Distribution of Income to partners : It is accounted for by debiting partnership income summary account by the Salary & total interest (even if it is greater than the total credit balance available in the partnership income summary account) and crediting the respective salary & interest account to each partner capital account.
S. No. Accounts Title and explanation Debit $ Credit $ 1. Net Income 66600 Coburn Capital 26640 Webb Capital 39960 (Net income 66600 distributed in 2:3 ratio between partners) 2. Net Income 66600 Coburn Capital 34780 Webb Capital 31820 ( Coburn and webb paid salary of 30300 & 25100 respectively, distributed rest income in the ratio 2:3) 3 Net Income 93580 Coburn Capital (40700 + 6768) 47468 Webb Capital (35600 + 10512) 46112 ( Coburn and webb paid salary of 40700 & 35600 respectively, an interest of 12 % on their opening capital balance is paid, Coburn 6768 & webb 10512 and distributed rest income in the ratio 1:1) 4. Ending Capital in part 3. Coburn Capital (56400 + 40700 + 6768 ) = $103,868 Webb Capital (87600 + 35600 + 10512 ) = $133,712