Problem 11-248 [LO S1] Groucho, Harpo, and Chico go into partnership on January
ID: 2573087 • Letter: P
Question
Problem 11-248 [LO S1] Groucho, Harpo, and Chico go into partnership on January 1, 2015. Groucho contributes $360,000, Harpo $280,000, and Chico $160,000 to a business called Marx Brothers Partnership. On a monthly basis, each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided. Assume that Groucho receives $7,200 cash per month. Required a-d. Prepare the journal entry for the following transactions: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) i) The initial investment (il) The monthly distribution amounts for each of the three partners. (i") The allocation of an annual net income of $336,000.For purposes of this journal entry, assume sales were $504, operating expenses. 000 and that all expenses (totaling $168,000) were recorded in a single account called (v) The closing of the drawings accounts at the end of the year View transaction list 1 Record the entry for the initial investment 2 Record the entry for the monthly distribution. 3 Record the entry for the allocation of an annual net income. Record the entry for the closing of the drawings accounts at the end of the year 4 20 aod F FI FS F7Explanation / Answer
Answer a-d Answer e Journal Entries MARX BROTHERS PARTNERSHIP Ref. Description Debit Credit Statement of Partner's Equity 1 Cash $800,000 For the year ending December 31,2015 Groucho's Capital $360,000 Groucho Harpo Chico Harpo's Capital $280,000 Investments.Jan.1,2015 $360,000 $280,000 $160,000 Chico's Capital $160,000 Add : Net income $151,200 $117,600 $67,200 Total $511,200 $397,600 $227,200 2 Groucho's Drawings $7,200 Less : Drawings $7,200 $5,600 $3,200 Harpo's Drawings $5,600 Partner's Equity Dec.31,2015 $504,000 $392,000 $224,000 Chico's Drawings $3,200 Cash $16,000 3 Income summary $336,000 Groucho's Capital $151,200 Harpo's Capital $117,600 Chico's Capital $67,200 4 Groucho's Capital $7,200 Harpo's Capital $5,600 Chico's Capital $3,200 Groucho's Drawings $7,200 Harpo's Drawings $5,600 Chico's Drawings $3,200 Income and cash distribution ratio as per initial capital proportion = 36:28:16 i.e. 9:7:4 As cash withdrawal is allowed in proportion to the provided capital , hence Harpo's Cash withdrawal = (7*$7200)/9 = $5600 Chico's Cash withdrawal = (4*$7200)/9 = $3200