Comprehensive Partnership Problem

P15.8 Comprehensive Partnership Problem
Brian Snow and Wendy
Waite formed a partnership on July 1, 2007. Brian invested $20,000 cash,
inventory valued at $15,000, and equipment valued at $67,000. Wendy
invested $50,000 cash, and land valued at $120,000. The partnership
assumed the $40,000 mortgage on the land.
On June 30, 2008, the
partnership reported a net loss of $24,000. The partnership contract
specified that income and losses were to be allocated by allowing 10%
interest on the original capital investment, salaries of $15,000 to
Brian and $20,000 to Wendy, and the remainder to be divided in the ratio
of 40:60.
On July 1, 2008, Alan Young was admitted into the
partnership with a $70,000 cash investment. Alan was given a 30%
interest in the partnership because of his special skills. The partners
elect to use the bonus method to record the admission. Any bonus should
be divided in the old ratio of 40:60.
On June 30, 2009, the
partnership reported a net income of $150,000. The new parntership
contract stipulated that income and losses were to be divided in a fixed
ratio of 20:50:30.
On July 2, 2009, Brian withdrew from the
partnership for personal reasons. Brian was given $40,000 cash and a
$60,000 note for his capital interest.
Required:
Prepare journal entries for each of the following events. Show computations.
1. Formation of the partnership.
2. Distribution of the net loss for the first year.
3. Admission of Alan into the partnership.
4. Distribution of the net income for the second year.
5. Withdrawal of Brian from the partnership.

 

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