Session:15 Partnership Accounting
Problem Set A
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
PA 1. LO 15.3The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after Tatum receives a 10,000 salary and Brook receives a 15,000 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is:
- $40,000
- $25,000
- ($5,000)
In addition, show the resulting entries to each partner’s capital account. Tatum’s capital account balance is $50,000 and Brook’s is $60,000.
PA 2. LO 15.4Arun and Margot want to admit Tammy as a third partner for their partnership. Their capital balances prior to Tammy’s admission are $50,000 each. Prepare a schedule showing how the bonus should be divided among the three, assuming the profit or loss agreement will be 1:3 once Tammy has been admitted and her contribution is:
- $20,000
- $80,000
- $50,000.
In addition, show the resulting journal entries to each of the three partners’ capital accounts.