The Prince-Robbins partnership has the following capital account balances on Jan
ID: 2575488 • Letter: T
Question
The Prince-Robbins partnership has the following capital account balances on January 1, 2018:
Prince is allocated 80 percent of all profits and losses with the remaining 20 percent assigned to Robbins after interest of 7 percent is given to each partner based on beginning capital balances.
On January 2, 2018, Jeffrey invests $73,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 7 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $23,000.
a.Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018.
b.Determine the allocation of income at the end of 2018.
Prince, Capital $ 130,000 Robbins, Capital 120,000Explanation / Answer
DATE
DETAILS
$
DEBIT
CREDIT
JAN 2
2018
CAPITAL ACCOUNT - PRINCE
$75000
CAPITAL ACCOUNT – ROBBINS
$25000
CAPITAL ACCOUNT - JEFFERY
$50000
( BEING TRANSFER OF GOODWILL)
$
$
NET INCOME
23000
INTEREST ON CAPITAL
CURRENT A/C - PRINCE
14350
CURRENT A/C - ROBBIN
6650
CURRENT A/C- JEFFRY
1610
(22610)
390
CURRENT A/C - PRINCE
195
CURRENT A/C - ROBBIN
117
CURRENT A/C- JEFFRY
78
(390)
0
DATE
DETAILS
$
DEBIT
CREDIT
JAN 2
2018
CAPITAL ACCOUNT - PRINCE
$75000
CAPITAL ACCOUNT – ROBBINS
$25000
CAPITAL ACCOUNT - JEFFERY
$50000
( BEING TRANSFER OF GOODWILL)
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