Summers and Winters Formed a Partnership on January 1,2012

question 77

Essay

Summers and Winters formed a partnership on January 1,2012.Summers contributed $90,000 cash and equipment with a market value of $60,000.Winters' investment consisted of: cash,$30,000; inventory,$20,000; all at market values.Partnership net income for 2013 and 2012 was $75,000 and $120,000,respectively.
Determine each partner's share of the net income for each year,assuming each of the following independent situations:
a.Income is divided based on the partners' failure to sign an agreement.
b.Income is divided based on a 2:1 ratio (Summers: Winters).
c.Income is divided based on the ratio of the partners' original capital investments.
d.Income is divided based on partners allowed 12% of the original capital investments,with salaries to Summers of $30,000 and Winters of $25,000 and the remainder to be divided equally.
Prepare the journal entry to record the allocation of the 2013 income under alternative (d)above.

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Definitions:

Union Boycotts

Actions taken by labor unions to refuse to buy, sell or handle products from a company to protest against its policies or to demand better working conditions.

American Federation of Labor

A national federation of labor unions in the United States, founded in 1886, that aimed to represent the interests of skilled workers and push for better wages, working conditions, and labor laws.

Unskilled Workers

Laborers who do not have specialized training or skills, often employed in basic tasks in various industries.

Africans-Americans

Individuals in the United States who have ancestry tracing back to the black racial groups of Africa.