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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