Steve King and Chelsy Boxer formed a partnership, dividing income as follows: An
ID: 2524784 • Letter: S
Question
Steve King and Chelsy Boxer formed a partnership, dividing income as follows: Annual salary allowance to King of $110,200. Interest of 7% on each partner's capital balance on January 1. Any remaining net income divided to King and Boxer, 1:2. King and Boxer had $88,640 and $97,560, respectively, in their January 1 capital balances. Net income for the year was $190,000. How much is distributed to King and Boxer? Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar. King: $ Boxer: $
Catrina Santana contributed a patent, accounts receivable, and $21,320 cash to a partnership. The patent had a book value of $8,420. However, the technology covered by the patent appeared to have significant market potential. Thus, the patent was appraised at $92,790. The accounts receivable control account was $40,400, with an allowance for doubtful accounts of $1,900. The partnership also assumed a $9,700 account payable owed to a Santana supplier. On December 31, provide the journal entry for Santana's contribution to the partnership. Refer to the Chart of Accounts for exact wording of account titles.
Explanation / Answer
a) net income = 190000
less: interest on capital [(88640 + 97560) * 7%] =13034
less: salary to king = 110200
Distributable earning to King and Chelsy = $66766
King (66766 * 1/3) = $22255.33
Boxer (66766 * 2/3) = $44510.67
b) journal entry for Santana's contribution to the partnership
Partnership firm 142910 allowance for doubtful accounts 1900 Accounts payable 9700 To cash 21320 To Patent 92790 To accounts receivable 40400