Question

Adler​, Milton​, and Bryant have capital balances of $20,000​, $30,000​, and $50,000​, respectively. The partners share profits and losses as​ follows:a. The first $30,000 is divided based on the​ partners' captal balances.b. The next $30,000 is based on​ service, shared equallyby Adler and Bryant. Milton does not receive a salary allowance.c. The remainder is divided equally.Requirements1. Compute each​ partner's share of the $72,000 net incme for the year.2. Journalize the closing entry to allocate net income for the year. Adler Milton Bryant TotalNet income (loss) $72,000Capital allocation:Adler $6,000Milton $9,000Bryant $15,000Salary allowance:Adler 15,000Milton 0Bryant 15,000Total salary and capital allocation 21,000 9,000 30,000 (60,000)Net income (loss) remaining for allocation 12,000Remainder shared equally:Adler 4,000Milton 4,000Bryant 4,000Total allocation (12,000)Net income (loss) remaining for allocation 0Net income (loss) allocated to the partners $25,000 $13,000 $34,000Requirement 2. Journalize the closing entry to allocate net income for the year. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)Date Accounts and Explanation Debit CreditIncome Summary 72,000Adler, Capital 25,000Milton, Capital 13,000Bryant, Capital 34,000To close Income Summary account to partners' capital.

Answer 1

Answer:

Adler​, Milton​, and Bryant

1. Computation of each partner's share of the $72,000 net income for the year:

                                  Adler​       Milton​        Bryant         Total

First $30,000:

Capital allocation      6,000      9,000         15,000       30,000

Second $30,000:

Salary allowance     15,000        0              15,000        30,000

Remainder $12,000:

Shared equally        4,000       4,000           4,000        12,000

Total                   $25,000    $13,000      $34,000     $72,000

2. Closing Journal Entry to allocate the net income for the year:

Date     Accounts and Explanation       Debit     Credit

Dec. 31 Income Summary                   $72,000

            Adler, Capital                                         $25,000

            Milton, Capital                                           13,000

            Bryant, Capital                                          34,000

To close Income Summary account to partners' capital.

Explanation:

a) Data and Calculations:

Net Income = $72,000

Sharing formula:

First $30,000 is divided based on the​ partners' capital balances.

Next $30,000 is based on​ service, shared equally by Adler and Bryant.

Remainder is divided equally.

                                  Adler​       Milton​        Bryant         Total

Capital balances   $20,000​  $30,000​     $50,000​    $100,000

Ratio of capital          2 :            3 :                5                10

First $30,000:

Capital allocation      6,000      9,000         15,000       30,000

Second $30,000:

Salary allowance     15,000        0              15,000        30,000

Remainder $12,000:

Shared equally        4,000       4,000           4,000        12,000

Total                   $25,000    $13,000      $34,000     $72,000