At the end of its first year of operations on December 31, 2017, ABS Company's accounts show the following.
Partner Drawings Capital
Jodi Ames..................£23,000.............£48,000
Jill Bolen.....................14,000...............30,000
Ann Sayler...................10,000...............25,000
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.
Instructions
(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 £28,000. Income is shared 6:3:1.
(2) Net income is £34,000. Ames and Bolen are given salary allowances of £18,000 and £10,000, respectively. The remainder is shared equally.
(3) Net income is £22,000. Each partner is allowed interest of 10% on beginning capital balances. Ames is given a £15,000 salary allowance. The remainder is shared equally.
(b) Prepare a schedule showing the division of net income under assumption (3) above.
(c) Prepare a partners' capital statement for the year under assumption (3) above.