Question

B5 Brandy and Johnson decide to organize a partnership. Brandy invests $25,000 cash, and Johnson contributes $5,000 and equipment having a book value of $3,500 and a fair market value of $10,000. Instructions Prepare the entry to record each partner's investment. BE 6 The Jill & Frill Co. reports net income of $28,000. Interest allowances are Jill $3,000 and Frill $5,000; partner salary allowances are Jill $18,000 and Frill $10,000 and the remainder is shared equally. Instructions Indicate the division of net income to each partner, and prepare the entry to distribute the net income.

Answer 1

1.

	General Journal	Debit	Credit
1.	Cash	$25,000
	Brandy, Capital		$25,000
2.	Cash	$5,000
	Equipment	10,000
	Johnson, Capital		$15,000

2.

	Jill	Frill	Total
Net income			$28,000
Interest allowance	3,000	5,000	(8,000)
Salary allowance	18,000	10,000	(28,000)
Remainder balance			(8,000)
Loss to be shared (1:1)	(4,000)	(4,000)	8,000
Total	$17,000	$11,000	$0

	General Journal	Debit	Credit
1.	Income summary	$28,000
	Jill, Capital		$17,000
	Frill, Capital		11,000