60.1K

Verified Solution

Link Copied!

Question 4 (12 marks) Two partners, Peralta and Boyle, formed a partnership, 99 Consulting, on January 1, 2020. Peralta contributed $160,000 cash; Boyle contributed $80,000 cash and equipment with a fair market value of $48,000. Boyle had originally purchased the equipment for $60,000 but it has depreciated to $52,000. For the year ended December 31, 2020, the partnership had consulting revenue of $360,000 and operating expenses of $110,000. Peralta withdrew cash of $48,000, and Boyle withdrew cash of $72,000. These were debited to their respective Drawings accounts. Peralta and Boyle have agreed that profit will be allocated as follows: 1) an interest allowance of 12% of each partner's beginning capital balance. 2) a salary allowance of $120,000 for Peralta and $90,000 for Boyle. 3) any remaining profit or loss after calculation of these allowances will be allocated 55% to Peralta and 45% to Boyle. Requirements: (a) Prepare the journal entries for the initial contribution by Peralta and Boyle (3 marks) (b) Calculate each partner's share of the profit (3 marks). (c) Prepare a Statement of Partners' Equity for the year ended December 31, 2020 in good form (3 marks). (d) In January of the following year (2021) Crews was admitted to the partnership for $120,000 with 30% ownership. Prepare the entry to record Crews admission into the partnership. Peralta and Boyle have agreed to share in any capital gain or reduction of Crew's admission evenly

Answer & Explanation Solved by verified expert

See Answer