At the end of its first year of operations, on December 31, 2024, CRW Partners’ accounts show the following:

The capital balance represents each partner’s initial capital investment. No closing entries for profit (loss) or drawings have been recorded as yet. 

Instructions 

a. Journalize the entry to record the division of profit for the year ended December 31, 2024, under each of the following independent assumptions: 

1. Profit is $30,000. Income is shared 6:3:1. 

2. Profit is $40,000. Roper and Weir are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally. 

3. Profit is $40,000. Each partner is allowed interest of 10% on beginning capital balances. Chapman, Roper, and Weir are given salary allowances of $15,000, $10,000, and $12,000, respectively. The remainder is shared in a ratio of 5:3:2. 

b. Prepare a statement of partners’ equity for the year under assumption 2 in part (a) above.  

Explain why partnerships such as CRW Partners include an interest allowance in their profit- and loss-sharing arrangements.  

Transcribed Image Text:

Partner J. Chapman C. Roper H. Weir Drawings $23,000 14,000 10,000 Capital $48,000 30,000 25,000