CORPORATION SIMULATION ACTIVITY 1: Partnership Accounting Jim Beaver, Sandra Smi
ID: 2470238 • Letter: C
Question
CORPORATION SIMULATION
ACTIVITY 1: Partnership Accounting
Jim Beaver, Sandra Smith, and Keith Holden formed a partnership by making capital contributions of $144,000, $216,000 and $120,000 respectively. They predict annual partnership net income of $240,000 and are considering the following alternative plans of sharing income and loss: a) Equal distribution; b) According to the ratio of their initial capital investments; c) Salary allowances of $40,000 to Beaver, $30,000 to Smith, and $80,000 to Holden; interest allowances of 12% on their initial capital investments; and the balance shared
equally
Students should use Microsoft Excel to formulate responses to tasks assigned in this simulation, using either free-form, or refer to samples and templates provided to reproduce what is necessary to complete activity tasks.
TASK 1: Prepare a table with the following column headings:
Income (Loss) Sharing Plan Calculations Beaver Smith Holden Total Use the table to show how to distribute net income of $240,000 for the calendar year under each of the alternative plans being considered (round answers to nearest whole dollar).
TASK 2: Prepare a Statement of Partners’ Equity
Show the allocation of income to the partners assuming they agree to use plan (c), that income earned is $87,600, and that Beaver, Smith and Holden withdraw $18,000, $38,000 and $24,000 respectively, at year-end.
TASK 3: Prepare Journal entries
Close Income Summary, assuming partners agree to use plan (c) and that net income is $87,600. Close withdrawal accounts.
Explanation / Answer
Jim Beaver Sandra Smith Keith Holden
Salary allowances $40,000 , $30,000 $80,000
184000 246000 200000
+12%interest 22080 29520 24000
total 206080 275520 224000
equally 78400 78400 78400
contribute according to salaryincome
2- income 29200 29200 29200
withdwawal 18000 38000 24000
3- date particulars debit credit
-net income 87600
to partners 87600