Question

**** need help with numbers that say 'incorrect' next to them***

In the early part of 2018, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2017 but had never used an accountant’s services.

Hugh and Jacobs began the partnership by contributing $190,000 and $140,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows:

• Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period.
• A compensation allowance of $9,000 was to go to Hugh with a $31,000 amount assigned to Jacobs.
• Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively.

  

In 2017, revenues totaled $215,000, and expenses were $170,000 (not including the partners’ compensation allowance). Hugh withdrew cash of $11,000 during the year, and Jacobs took out $16,000. In addition, the business paid $8,500 for repairs made to Hugh’s home and charged it to repair expense.

On January 1, 2018, the partnership sold a 20 percent interest to Thomas for $102,000 cash. This money was contributed to the business with the bonus method used for accounting purposes.

C. What journal entries should the partnership have recorded on December 31, 2017?

D. What journal entry should the partnership have recorded on January 1, 2018?

• Required C

What journal entries should the partnership have recorded on December 31, 2017? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Transaction	General Journal	Debit	Credit
1	1	Hugh, drawings	8,500 correct
		Repair expense		8,500 correct
2	2	Hugh, capital	19,500 correct
		Jacobs, capital	16,000 correct
		Hugh, drawings		19,500 correct
		Jacobs, drawings		16,000 correct
3	3	Revenues	215,000 correct
		Expenses		161,500 correct
		Income summary		53,500 correct
4	4	Income summary	53,500 correct
		Hugh, capital		53,000 incorrect
		Jacobs, capital		82,500 incorrect

• Required D

What journal entry should the partnership have recorded on January 1, 2018? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Transaction	General Journal	Debit	Credit
1	1	Cash	102,000 correct
		Hugh, capital		45,000 incorrect
		Jacobs, capital		22,800 incorrect
		Thomas, capital		34,200 incorrect

Answer 1

PART C		Total	Salary to partners	Balance in 4:6
	Dr	Cr
Income summary	53500
Hugh		14400	9000	5400
Jacobs		39100	31000	8100

PART D
	Dr	Cr
CASH	102000
Thomas		102000