Question

PROBLEM 18   (18 pts.)
Partners Conner, Tuitt, and Heyward share profits and losses in a 3:4:5 ratio, respectively. Their average capital balances for the quarter year were $50,000, $70,000, and $80,000, respectively.
Conner and Heyward each receive a “salary” of $8,000 each quarter due to their years of experience
in the field. All three partners receive 5% interest on their average capital balance. The net income
for this quarter was $25,100.
Prepare a schedule that shows the distribution of the net income to the partners.
PROBLEM 19   (8 pts.)
Partners Mendenhall and Bettis share profits and losses in a 3:5 ratio. Lipps is admitted as a new
partner when he invests $40,000 for 30% ownership in the business. The current partners'
capital account balances are:
Mendenhall   $45,000 Bettis               $65,000

Prepare the journal entry to admit Lipps to the partnership.

Answer 1

(18)

Profit and Loss Appropriation Account

Net income		$25,100
Less: Salaries
Corner	$8,000
Heyward	8,000	(16,000)
		9,100
Less: interest on capital
Corner (5% of $50,000)/4	625
Tuitt. (5%of $70,000)/4	875
Heyward (5% of $80,000)/4	1,000	(2,500)
		6,600
Allocation of residual Profit among the partners in the ratio of 3:4:5
Corner	1,650
Tuitt	2,200
Heyward	2,750	6,600

Note : Rate of interest of capital is given annually

(19)

Journal entry to admit Lipps into partnership

Date	Account Details and Explanation	Debit ($)	Credit ($)
	Cash	40,000
	Lipps'capital account		40,000
	To record admission of Lipps to the partnership firm

Thank you ;)