Groucho,Harpo and Chico Go into Partnership on January 1,2014

question 137

Essay

Groucho,Harpo and Chico go into partnership on January 1,2014.Groucho contributes $90,000,Harpo $70,000,and Chico $40,000 to a business called Marx Brothers' Partnership.On a monthly basis,each partner is allocated income and is allowed to receive cash from the business in proportion to the capital they provided.Groucho receives $2,700 cash per month.
a.Prepare the journal entry for the initial investment.
b.Prepare the journal entry that would be made in one month for the monthly distribution.
c.Prepare the journal entry for the allocation of an annual net income of $84,000.For purposes of this journal entry,assume sales were $116,000 and that all expenses (totaling $32,000)were recorded in a single account called operating expenses.
d.Prepare the journal entry for the closing of the drawings accounts at the end of the year.
e.Prepare a Statement of Partners' Equity (assume no additional investments made).

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Definitions:

Wholly Owned Subsidiary

A company whose entire share capital is held by another company.

Uniform Accounting Practices

Standardized accounting procedures and practices that ensure consistency and comparability across companies and industries.

Uniform Accounting Policies

Accounting standards and policies that are consistently applied across different entities within a group, ensuring comparability and transparency of financial statements.

Investee

An entity in which an investor holds a minority stake, without controlling interest.