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  3. 1 a and b form the ab partnership. according to th

1 A and B form the AB partnership. According to the agreement, A contributed $70,000 in...

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Accounting

1 A and B form the AB partnership. According to the agreement, Acontributed $70,000 in cash while B contributed $80,000. Make thejournal entry to form the partnership under the followingassumptions:

a) The agreement was silent about allocating capitalbalances.

b) The agreement specified that capital balances will beallocated equally and the bonus method will be used.

c) The agreement specified that capital balances will beallocated equally and the goodwill method will be used.

2 Using the information from question #la above, the partners inthe AB partnership agreed that profits and losses will be shared asfollows • Salary: A $65,000 B $35,000 • Interest: Partners get 10%interest on beginning capital balance • Bonus: Partner A gets abonus of 15% of net income generated • Remaining profit or lossshared equally Assume that after the first year of operation, theAB partnership generated: i) Net income $150,000 ii) Net income$70,000 iii) Net loss ($75,000)

a) For each of the income/ loss amounts above, determine thepartners share of the income or loss

b) Prepare the end of year closing entries

c) Determine the ending capital balances for each partner

Answer & Explanation Solved by verified expert
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In the absence of Partneship agreement no interest on capital salary commission is to be allowed to partners i If Net income 150000 Journal Entry Particulars Dr Cr Cash Ac    See Answer
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