Question

Thank you!! ??

Problem 11-5A Partnership entries, profit allocation, admission of a partner L02,3,4 CHECK FIGURES: c. Cr Bow: $245,200; Cr Amri: $134,800; d. Dr Amri: $48,000 On June 1, 2017, Jill Bow and Aisha Amri formed a partnership, to open a commercial gluten-free bak- ery, contributing $280,000 cash and s360,000 of equipment, respectively. Also, the partnership as sumed responsibility for a $40,000 note payable associated with the equipment. The partners agreed to share profits as follows: Bow is to receive an annual salary allowance of $150,000, both are to re- ceive an annual interest allowance of 8% of their original capital investments, and any remaining profit or loss is to be shared 40/60 (to Bow and Amri, respectively). On November 20, 2017, Amri with- drew cash of $100,000. At year-end, May 31, 2018, the Income Summary account had a credit balance of $380,000. On June 1, 2018, Peter Wilems invested $120,000 and was admitted to the partnership for a 20% interest in equity. Required 1. Prepare journal entries for the following dates: a. June 1, 2017 b. November 20, 2017 e. May 31, 2018 d. June 1, 2018 2. Calculate the balance in each partner's capital account immediately after the June 1,2018, entry.

Answer 1

While making any accounting entry, keep following 3 rules in mind

1. Debit what comes in, Credit what goes out.
2. Debit all expenses, Credit all Incomes
3. Debit all Assets, Credit all liabilities (including capital)

a. Cash and Equipment are assets and hence they shall be debited. The Capital Account of Jill Bow and Aisha Amri shall be credited. Trade Payable is a liability and hence shall be credited. The journal entry will be

Date	Particulars	Dr. Amount ($)	Cr. Amount($)
01-Jun-2017	Cash A/c Dr.	280,000
	Equipment A/c Dr.	360,000
	To Jill Bow's Capital A/c		280,000
	To Aisha Amri's Capital A/c		320,000
	To Trade Payable A/c		40,000
	(Being cash and equipment introduced in business as capital)

As per the question Cash was introduced by Jill Bow and Equipment by Aisha Amri. The trade payable is against the equipment whose total cost is $ 3,60,000. Hence, $ 3,20,000 is the capital introduced by Aisha Amri and balance $ 40,000 is trade payable

b. Aisha Amri withdraws cash amounting to $ 100,000. Cash is going out and hence will be credited. The capital o Aisha Amri is being decreased hence shall be debited

Date	Particulars	Dr. Amount($)	Cr. Amount($)
20-Nov-2017	Aisha Amri's Capital A/c Dr.	100,000
	To Cash A/c		100,000
	(Being cash withdrawn by partner Aisha Amri)

c. At year end salary to Jill Bow shall be accounted. Salary is an expense, hence shall be debited. The capital of Jill Bow will increase hence the capital Account will be credited

Interest @ 8% on original Capital Investment is to be provided. Interest is an expense and shall be debited. The capital A/c of Partner will increase and hence shall be credited

The question states that on 31-May-2018, Income statement had a balance of $ 380,000. Assuming that Partner's salary and Interest on partner's capital were not debited from Income statement, the balance in income statement comes down to $ 182,000 ($ 380,000 - 150,000 - 48,000). The balance shall now be credited to capital account of Jill Bow and Aisha Amri in the ratio of 40/60.

d. Peter Williams invested $ 120,000 on Jun 01, 2018. Assuming that all investment was made in cash, cash a/c shall be credited.

2. Calculation of Capital A/c balance of each partner as on Jun 01, 2018

a. Jill Bow - Introduced $ 280,000 as Capital + Salary of $ 150,000 credited + Interest on Capital amounting to $ 22,400 credited + share in profit $ 72,800 = 525,200

b. Aisha Amri - Introduced $ 320,000 as capital - Withdrawal of $ 100,000 in cash + Interest on Capital amounting to $ 25,600 + Share in Profit $ 109,200 = 354,800

c.Peter Williams - Introduced Capital $ 120,000. As there is no other transaction, the capital balance of Peter William is $ 120,000