Scott Badger and Maxine Giesen are partners in a business. On December 31 of the current year,
Question:
Scott Badger and Maxine Giesen are partners in a business. On December 31 of the current year, the partners’ equities are Scott, \($60,000.00\) and Maxine, \($90,000.00.\) The net income for the year is \($60,000.00.\) A work sheet for calculating distribution of partners’ earnings, a cash payments journal, and a general journal are provided in the Working Papers. Your instructor will guide you through the following examples.
1. For each of the following independent cases, calculate how the \($60,000.00\) net income will be distributed to the two partners.
a. Each partner receives a fixed percentage of 50% of net income.
b. Each partner receives a percentage of net income based on the percentage of total equity.
c. Each partner receives 10% interest on equity. The partners share remaining net income equally.
d. Scott receives 8% interest on equity and a salary of \($18,000.00.\) Maxine receives 8% interest on equity and a salary of \($22,500.00.\) The partners share remaining net income equally.
2. Record the following transactions in the appropriate journal.
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