Reference no: EM132805980
Question - At the end of its first year of operations on December 31, 2020, Ivanhoe Company's accounts show the following.
|
Partner
|
Drawings
|
Capital
|
|
Art Niensted
|
$23,200
|
$40,600
|
|
Greg Bolen
|
13,800
|
33,500
|
|
Krista Sayler
|
11,300
|
25,000
|
The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts.
To record the division of net income for the year 2020 under each of the following independent assumptions.
1. Net income is $30,700. Income is shared 6:3:1.
2. Net income is $40,500. Niensted and Bolen are given salary allowances of $15,200 and $10,000, respectively. The remainder is shared equally.
3. Net income is $19,100. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,490 salary allowance. The remainder is shared equally.
A schedule showing the division of net income under assumption (3) above. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).)
|
|
Art Niensted
|
Greg Bolen
|
Krista Sayler
|
Total
|
|
Salary allowance
|
15490
|
|
|
15490
|
|
Interest allowance on capital
|
4060
|
3350
|
2500
|
9910
|
|
Total salaries and interest
|
19550
|
3350
|
2500
|
25400
|
|
Remaining excess / deficiency
|
-2100
|
-2100
|
-2100
|
-6300
|
|
Total division of net income
|
17450
|
1250
|
400
|
19100
|
Required - Journalize the entry to record the division of net income for the year 2020 under each of the above independent assumptions.