At the end of its first year of operations on December 31, 2017, NBS Company's accounts show the...

Question:

At the end of its first year of operations on December 31, 2017, NBS Company's accounts show the following.

Partner Drawings Capital
Art Niensted$22,600$42,100
Greg Bolen13,80035,500
Krista Sayler10,20025,000

The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2017 has not been closed to the partners' capital accounts.

a. Journalize the entry to record the division of net income for the year 2017 under each of the following independent assumptions.

(1) Net income is $29,800. Income is shared 6 : 3 : 1.

(2) Net income is $40,200. Niensted and Bolen are given salary allowances of $14,800 and $10,400, respectively. The remainder is shared equally.

(3) Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $13,740 salary allowance. The remainder is shared equally.

b. Prepare a schedule showing the division of net income under assumption (3) above.

c. Prepare a partner's capital statement under assumption (3) above.

Partnerships:

Partnerships are unincorporated business vehicles in which the net income is allocated to the partners' capital accounts according to their profit-sharing agreement, and withdrawals are deducted from the capital accounts.

Answer and Explanation: 1

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a

(1)

Niensted Bolen Sayler Total
Net Income (loss) $29,800
Balance allocated 6:3:1 $17,880 $8,940 $2,980 $(29,800)
Balance of income...

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