CH12.2 Do In Class Handout Answer the following questions: forton and Long plan
ID: 2391017 • Letter: C
Question
CH12.2 Do In Class Handout Answer the following questions: forton and Long plan to enter into a law partnership, investing $30,000 and $20,000, respectively. They have agreed on e 1) M verything but how to divide the profits. Calculate each partner's share of the profit under each of the following independent assumptions a I the first year's net income is $50,000 and they cannot agree, how should the profits be income divided? b. If the partners agree to share net income according to their investment ratio, how should the $50,000 be divided? c. If the nvestments, giving salary allowances of $10,000 each, and dividing the remainder equally, owners agree to share net income by granting 10 percent interest on their original how should the $50,000 be divided? 2) Assume Morton and Long from Exercise 14.1 use method c to divide profits and net income is $20,000. How should the income be divided? 3) After a number of years, Long, from Exercise 14.1, decided to go with a large law firm and wishes to sell his interest to Brown. Long's equity at this time is $35,000. Morton agrees to take Brown as a partner, and Long sells his interest to Brown for $40,000. Prepare the general journal entry on December 31,20XX to record the sale of Long's interest to Brown. 4) Smith, White, and Saint are partners owning the Book Nook. The equities of the partners are $60,000, $50,000, and $40,000, respectively. They share profits and losses equally. White wishes to retire on May 31,20XX. Prepare the general journal entries to record White's retirement under each independent assumption. a. White is paid $50,000 in partnership cash. b. White is paid $40,000 in partnership cash. c. White is paid $55,000 in partnership cash. 5)Hall and Mason share profits and losses equally and have capital balances of $60,000 and $40,000, respectively. Taylor is to be admitted on January 2, 20xX, and is to receive a one-third interest in the firm. Prepare the general journal entries to record the addition of Taylor as a partner under the following unrelated circumstances a. Taylor invests $50,000. b. Taylor invests $62,000. c. Taylor invests $47,000.Explanation / Answer
Answer:-
A) Each Partners share of Profit under following independent assumptions
a) If they do not agree, Net income or loss is allocated to the partners in accordance with the partnership agreement.
In the absence of any agreement between partners, profits and losses must be shared equally regardless of the ratio of the partners' investments.
so For Morton = $50,000*1/2 = $25,000 Profit
so For Long Plan = $50,000*1/2 = $25,000 Profit
b) If Agree to Share net Income In accordance with Investement ratio:-
so Mortons share of Investement = $30,000
long plan share of Investement = $20,000
Total Investement in Business = $50,000
ratio of investement:-
Morton = 30000/50000 = 0.6
Long Plan = 20000/50000 = 0.4
Distribution of Net Income :-
Morton share of Net income = $50,000*0.60 = $30,000
Long Plan Share of Net Income = $ 50,000*0.40 = $20,000
c) If Agree to share by granting followings:-
1. 10% Interest on Investements
2. Salary of $10,000
3. reminder Equally
Net Income Available = $50,000
Adjustement 1
Morton Investement Interest
= $30,000*10% = $3,000
Long Plan Investement Interest
= $20,000*10% = $2,000
Total Interest Expense = 3000+2000 = ($ 5,000) to be deducted from net income
Adjustement no 2.
Morton's Salary = $10,000
Long Plan's salary = $10,000
Total Salary = $20,000 ( to be deducted from Net Income )
therefore net income available for distribution =
= $50,000 -$20000 - $5,000 = $25,000
Share of Adjusted Net income to each partner :-
Morton = 25000*1/2 = $12,500
Long Plan = 25000*1/2 = $12,500
As decided to share equally.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.