PROBLEM 3 (10 points) Jm & Clark Co. reports net income of $55,000. Jim and Clar
ID: 2401074 • Letter: P
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PROBLEM 3 (10 points) Jm & Clark Co. reports net income of $55,000. Jim and Clark beginning capital balanoes are respectively. The partnership income sharing agreement provides for annual salaries of $20,000 for Jim and $17,000 for Clark and int est allowances of 10% beginning capital balances. Any remain ginone or loss s to be shared 55% by Jim and 45% by Clark. Instructions a) Prepare a schedule showing the distribution of net income to each partner b) Prepare the closing entries for the division of net income. Note: Write clearly and use proper labels [do not abbrevilate). To earn full credit, you must show all the steps using appropriate levels and calculations as needed to allocate salary and interest allowance to partners. Do not simply show calculated amounts DIVISION OF NET INCOME NI Jim Clark Total General Journal JI Date Account Titles and Explanation Ref. Debit CreditExplanation / Answer
Problem 3 a
Division of Net Income
Jim
Clark
Net Income Total
Balance of Income
$ 55,000.00
Salary
$ 20,000.00
$ 17,000.00
$ 37,000.00
Balance of Income
$ 18,000.00
Interest on capital
$ 5,000.00
$ 4,000.00
$ 9,000.00
Balance of Income
$ 9,000.00
Balance distributed in ratio of 5.5:4.5
$ 4,950.00
$ 4,050.00
$ 9,000.00
Balance of Income
$ -
Total Distribution
$ 29,950.00
$ 25,050.00
$ 55,000.00
(Problem 3b) Closing journal entries
Net Income
$ 55,000.00
Jim's capital account
$ 29,950.00
Clark's Capital account
$ 25,050.00
(Net income distributed)
Problem 1
Journal entries
Cash
$ 85000
Accounts receivables
$ 40000*
Equipment
$ 25000
Capital Account-Richard
$ 70000
Capital Account-K- Stern
$ 80000
(Partnership started)
Note* Only the amount of Accounts receivable to be collected will be recorded.
Problem 2
Hart Corporation
Statement of retained Earnings
Retained Earnings on December 31 2016
$ 280,000.00
Net income during 2017
$ 320,000.00
Less: Dividend
$ 80,000.00
Less: Dividend
$ 224,000.00
Less: Dividend
$ 100,000.00
Retained Earnings on December 31 2017
$ 196,000.00
Note
Dividend of 7% is calculated on market price of share.
Problem 3 a
Division of Net Income
Jim
Clark
Net Income Total
Balance of Income
$ 55,000.00
Salary
$ 20,000.00
$ 17,000.00
$ 37,000.00
Balance of Income
$ 18,000.00
Interest on capital
$ 5,000.00
$ 4,000.00
$ 9,000.00
Balance of Income
$ 9,000.00
Balance distributed in ratio of 5.5:4.5
$ 4,950.00
$ 4,050.00
$ 9,000.00
Balance of Income
$ -
Total Distribution
$ 29,950.00
$ 25,050.00
$ 55,000.00
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