Bookmarks : ESCI 1 1 1 Quiz IO Problem 11-248 [LO S1 Groucho, Harpo, and Chico g

Question

Bookmarks : ESCI 1 1 1 Quiz IO Problem 11-248 [LO S1 Groucho, Harpo, and Chico go into partnership on January 1, 2015. Groucho contributes $360 a business called Marx Brothers' Partnership. On a monthly basis, each $280,000, and Chico $160,000 to partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided. Assume that Groucho receives $7.200 cash per month. Required a-d. Prepare the journal entry for the following transactions: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) (i) The initial investment. () The monthly distribution amounts for each of the three partners. (ii) The allocation of an annual net income of $336,000. For purposes of this journal entry, assume sales were $504,000 and that all expenses (totaling $168,000) were recorded in a single account called operating expenses. (iv) The closing of the drawings accounts at the end of the year. View transaction list View journal entry worksheet Credit 800,000 360,000 280,000 160,000 1 Record the entry for the initial investment. 2 Record the entry for the monthly distribution. Record the entry for the allocation of an annual net income 7,200 5,600 3,200 4 Record the entry for the closing of the drawings accounts 6,000 at the end of the year.

Explanation / Answer

Answer a-d Journal entries No. Transaction General Journal Debit Credit 1 1 Cash $800,000 Groucho Capital $360,000 Harpo Capital $280,000 Chico Capital $160,000 2 2 Groucho Drawings $7,200 Harpo Drawings $5,600 Chico Drawings $3,200 Cash $16,000 3 3 Income Summary $336,000 Groucho Capital $151,200 Harpo Capital $117,600 Chico Capital $67,200 4 4 Groucho Capital $86,400 Harpo Capital $67,200 Chico Capital $38,400 Groucho Drawings $86,400 Harpo Drawings $67,200 Chico Drawings $38,400 Initial Capital Contribution ratio = Groucho : Harpo : Chico = $360000:$280000:$160000 = 9:7:4 Cash Withdrawal of Groucho = $7200 Cash Withdrawal of Harpo = ($7200*7)/9 = $5600 Cash Withdrawal of Chico = ($7200*4)/9 = $3200 Answer e MARX BROTHERS PARTNERSHIP Statement of Partners Equity For the year ending December 31,2015 Groucho Harpo Chico Investments January 1,2015 $360,000 $280,000 $160,000 Add : Net Income $151,200 $117,600 $67,200 Totals $511,200 $397,600 $227,200 Less : Drawings $86,400 $67,200 $38,400 Partners Equity December 31,2015 $424,800 $330,400 $188,800

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