Kara Ries, Tammy Bax, and Joe Thomas invested $52,000, $68,000, and $76,000, respectively, in a partnership. During its first calendar year, the firm earned $392,100. Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $392,100 net income to the partners under each of the following separate assumptions:

Kara Ries, Tammy Bax, and Joe Thomas invested $52,000, $68,000, and $76,000, respectively, in a partnership. During its first calendar year, the firm earned $392,100.

Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $392,100 net income to the partners under each of the following separate assumptions:
Required:
(1)    The partners have no agreement on the method of sharing income and loss.

(2)   
The partners agreed to share income and loss in the ratio of their beginning capital investments. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)


(3)   
The partners agreed to share income and loss by providing annual salary allowances of $36,000 to Ries, $31,000 to Bax, and $43,000 to Thomas; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally.
 



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Meir, Benson, and Lau are partners and share income and loss in a 1:4:5 ratio. The partnership's capital balances are as follows: Meir, $28,000; Benson, $119,000; and Lau, $153,000. Benson decides to withdraw from the partnership, and the partners and the partners agree not to have the assets revalued upon Benson's retirement.

Meir, Benson, and Lau are partners and share income and loss in a 1:4:5 ratio. The partnership's capital balances are as follows: Meir, $28,000; Benson, $119,000; and Lau, $153,000. Benson decides to withdraw from the partnership, and the partners and the partners agree not to have the assets revalued upon Benson's retirement.


Prepare the journal entry to record Benson's withdrawal from the partnership under each of the following independent assumptions. (Do not round intermediate calculations.)

Benson (a) sells her interest to North for $160,000 after Meir and Lau approve the entry of North as a partner; (b) gives her interest to a son-in-law, Schmidt, and thereafter Meir and Lau accept Schmidt as a partner; (c) is paid $119,000 in partnership cash for her equity; (d) is paid $157,000 in partnership cash for her equity; and (e) is paid $12,000 in partnership cash plus equipment recorded on the partnership books at $32,000 less its accumulated depreciation of $11,600.

Explanation:

(d)

Meir, Capital = ($157,000 − $119,000) × 1 / 6 = $6,333

Lau, Capital = ($157,000 − $119,000) × 5 / 6 = $31,667

(e)

Meir, Capital = [$119,000 − ($32,000 − $11,600 + $12,000)] × 1 / 6 = $14,433

Lau, Capital = [$119,000 − ($32,000 − $11,600 + $12,000)] × 5 / 6 = $72,167

Assume that Benson does not retire from the partnership described in Part 1. Instead, Rhode is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Rhode’s entry into the partnership under each of the following separate assumptions. Rhode invests (a) $100,000; (b) $73,000; and (c) $131,000. (Do not round your intermediate calculations.)

 
Explanation:
(a)

Rhodes, Capital
$28,000 + $119,000 + $153,000 = $300,000
($300,000 + $100,000) × 25% = $100,000
Thus, no bonus is received or paid.

(b)

Meir, Capital = ($20,250* × 1 / 10) = $2,025
Benson, Capital = ($20,250* × 4 / 10) = $8,100
Lau, Capital = ($20,250* × 5 / 10) = $10,125
*Supporting calculations
($300,000 + $73,000) × 25% = $93,250
  $73,000 − $93,250 = $(20,250)
Thus, a bonus is paid to new partner.

(c)

Meir, Capital = ($23,250* × 1 / 10) = $2,325
Benson, Capital = ($23,250* × 4 / 10) = $9,300
Lau, Capital = ($23,250* × 5 / 10) = $11,625
*Supporting calculations
($300,000 + $131,000) × 25% = $107,750
  $131,000 − $107,750 = $23,250
Thus, a bonus is received by old partners.

Answer