Summers and Winters Formed a Partnership on January 1

question 94

Essay

Summers and Winters formed a partnership on January 1.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 year 1 and year 2 was $75,000 and $120,000,respectively.
1.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 interest allowance of 12% on the original capital investments; salary allowance to Summers of $30,000 and Winters of $25,000; and the remainder to be divided equally.
2.Prepare the journal entry to record the allocation of the Year 1 income under alternative (d)above.

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Definitions:

Under-Performing

Failing to achieve the expected or required level of performance, often in a work or educational context.

Job Performance

Job Performance is the evaluation of how effectively an employee carries out their duties, tasks, and responsibilities associated with their job.

Group Entitativity

The extent to which a collection of individuals is perceived as a cohesive and unified group.

Unified Team

A team characterized by high levels of collaboration, shared goals, and a strong sense of cohesion among its members.