89. Barber and Atkins are partners in an accounting firm and share net income an

Question

89. Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $203,000, and Atkins' beginning partnership capital balance for the current year is $351,000. The partnership had net income of $107,000 for the year. Barber withdrew $53,000 during the year and Atkins withdrew $25,000. What is Barber's return on equity?

89B. Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $120,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is: (Do not round intermediate calculations.)

89C. Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $600 cash, $1,900 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $3,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:

Explanation / Answer

89B.

Here , Wallace contributes = $60000 and Simpson contributes = $40000 .

i.e, 60000 : 40000 = 3 : 2

Therefore, Wallace = $120000 / 5 * 3 = $72000 , Simpson = $120000 / 5 * 2 = $48000 .

89C.

89A.

Since Barber and Atkins shares net income and loss equally , $107000 / 2 = $53500 net income to each.

Barber's Return on Equity = Net income / Average of share equity

Average of share equity = beginning balance + ending balance / 2 = $203000 + $203500 / 2 = $203250.

Barber's ROE = $53500 / $203250 = 26.322 = 26%

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