rr Left and Right are partners. Their capital accounts during 20X1 were as follows:Right, Capital9,000Left, CapitalDebit8/23 6,000Credit1/14/310/31Profit percentageAverage capitalNet incomeInterest on average capitalResidual incomeAllocateTotal30,0008,0006,000Partnership net income is $50,000 for the year. The partnership agreement provides for the division of income as follows:$1. Each partner is to be credited 8 percent interest on his or her average capital (calculated after rounding to the nearest number ofwhole months).2. Any remaining income or loss is to be divided equally.LeftRequired:Prepare an income distribution schedule.Note: Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.03/5%Debit$Right0%$$$EA GA$Credit1/17/610/7Total50,0007,0005,0003,780 %0000

Left Avg Capital DateDebitCreditBalanceMonthsMonths* Balance01-Jan $ 30,0003 $…

Answered: dited 8 percent interest on his or her…

Business

Accounting

dited 8 percent interest on his or her average capital (calculated r loss is to be divided equally.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 3-2 (Division of Profit; Interest on Average Capital) Danica and Jenson are partners. Their capital accounts during the fiscal year 2019 were as follows: Danica, Capital 120,000 1/1 Jenson, Capital 3/1 180,000 1/n 1,200,000 140,000 100,000 9/1 800,000 160,000 60,000 4/1 7/1 11/1 10/1 Profit of the partnership is P250,000 for the year. Determine the partners shared profit under the following assumptions: 1. Each partner is to be credited 12% interest on his average capital. 2. Any remaining profit or loss is to be divided equally.
The ABC partnership has three equal partners, A, B, and C, and the following balance sheet: Assets Partner's Capital Adj. Basis FMV Adj. Basis FMV Cash 60,000 60,000 A 70,000 80,000 Cap Asset 1 90,000 60,000 B 70,000 80,000 Cap Asset 2 40,000 60,000 C 70,000 80,000 Cap Asset 3 20,000 60,000 210,000 240,000 210,000 240,000 A receives capital asset #1 in an operating distribution. A has a one-ninth interest worth $20,000 in the partnership capital and profits after the distribution. (a) What results to A and the partnership if there is no §754 election? Reconstruct the balance sheet after the distribution. (b) What results to A and the partnership if the partnership has made a §754 election? Reconstruct the balance sheet after the distribution. (c) How should any basis adjustment be allocated among the partners?
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