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:

Writing Checks

The act of completing a check by specifying the date, payee, and amount, and signing it, to instruct a bank to transfer funds.

Adjusted Cash Balance

The cash balance reported in a company's financial statement, modified for factors like outstanding checks or deposits in transit.

Bank Statement

A monthly or quarterly document provided by a bank summarizing the transactions, including deposits and withdrawals, that occurred in a specific account.

Service Charge

A fee collected to pay for services related to the primary product or service being purchased.