Fallon and Springer Formed a Partnership on January 1

question 148

Essay

Fallon and Springer formed a partnership on January 1. Fallon contributed $90,000 cash and equipment with a market value of $60,000. Springer's 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 (Fallon: Springer).
(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 Fallon of $30,000 and Springer 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:

Infants' Cries

Vocalizations made by babies as a primary means of communication to signal a need or discomfort.

Shorter Durations

Referring to brief periods of time, often in the context of tasks, events, or attention spans.

Overprotective

Describing behavior that is excessively protective, potentially smothering or hindering development due to a lack of exposure to risk.

Self-Reliance

The reliance on one's own powers, resources, or efforts, often emphasizing independence and personal responsibility.