Smith and Jones formed a partnership, with Smith investing $40,000 and Jones $30,000. They agree to share
Question:
Smith and Jones formed a partnership, with Smith investing $40,000 and Jones $30,000. They agree to share net profit as follows:
A) no agreement was specified.
B) based on original contributed capital ratio.
C) based on a ratio of 60% Smith, and 40% Jones.
D) based on the following allowance method:
(1) Interest at 15% on contributed capital balances.
(2 )Salary allowances of $50,000 to Smith and $40,000 to Jones.
(3) Profit in excess of the amount required to cover the interest and salary allowances to be divided at the ratio of 60% to Smith and 40% to Jones.
Required:
During the year the partnership made a net profit of $120,500, prepare journal entry to transfer the net profit to the partner's capital account of all four (A, B, C & D) settings.
Expert Answer:
Initial capital contibutions Smith 4000000 Jones 3000000 Net Profit during the Year 12050000 Prepare the journal entry to transfer the net profit to t... View the full answer
