kindly please help me.
B1, G1, and P1 formed a partnership. They agreed that B1 will receive a bonus of 10% of partnership net income. B1 and G1 will receive salary allowances of $10,000 and $8,000, respectively, and the remaining income is allocated equally.
Net income amounts to $60,000 for 2010 and $12,000 for 2011.
Instructions:
a.Prepare a schedule showing distribution for 2010 and 2011 income
b. Prepare a journal entry for allocation of entry for 2010 and 2011.
To answer your question, we will follow these steps:
Step 1: Calculate the bonus for B1
Step 2: Calculate the total salary allowances for B1 and G1
Step 3: Calculate the remaining income after deducting the salary allowances
Step 4: Allocate the remaining income equally among B1, G1, and P1
Step 5: Prepare a schedule showing the distribution of income for 2010 and 2011
Step 6: Prepare journal entries for the allocation of income for 2010 and 2011
Now, let's start by calculating the bonus for B1:
Step 1: Calculate the bonus for B1
The bonus for B1 is 10% of the partnership's net income. Therefore:
Bonus for 2010 = 10% of $60,000 = $6,000
Bonus for 2011 = 10% of $12,000 = $1,200
Next, let's calculate the total salary allowances for B1 and G1:
Step 2: Calculate the total salary allowances for B1 and G1
B1's salary allowance = $10,000
G1's salary allowance = $8,000
Now, let's calculate the remaining income after deducting the salary allowances:
Step 3: Calculate the remaining income after deducting the salary allowances
Remaining income for 2010 = Net income - (B1's salary allowance + G1's salary allowance)
= $60,000 - ($10,000 + $8,000)
= $42,000
Remaining income for 2011 = Net income - (B1's salary allowance + G1's salary allowance)
= $12,000 - ($10,000 + $8,000)
= -$6,000 (negative indicates a loss)
Since the remaining income for 2011 is negative and indicates a loss, there will be no allocation for that year.
Now, let's allocate the remaining income for 2010 among B1, G1, and P1:
Step 4: Allocate the remaining income equally among B1, G1, and P1
Allocation per partner = Remaining income / Number of partners
= $42,000 / 3
= $14,000
Now, let's prepare a schedule showing the distribution of income for 2010 and 2011:
Step 5: Prepare a schedule showing the distribution of income for 2010 and 2011
| | B1 | G1 | P1 |
|--------|----------------|----------------|----------------|
| 2010 | Salary: $10,000| Salary: $8,000 | Allocation: $14,000 |
| 2011 | - | - | - |
Finally, let's prepare journal entries for the allocation of income for 2010 and 2011:
Step 6: Prepare journal entries for the allocation of income for 2010 and 2011
2010 journal entry:
Debit: Salary Expense ($10,000 + $8,000) = $18,000
Debit: Bonus Expense (B1's bonus) = $6,000
Credit: B1's Capital Account ($10,000 + $14,000) = $24,000
Credit: G1's Capital Account ($8,000 + $14,000) = $22,000
Credit: P1's Capital Account ($14,000) = $14,000
2011 journal entry:
No entry required as there is no income to allocate.
Please note that it's always a good practice to consult with a professional accountant or use accounting software to ensure the accuracy of your financial statements and journal entries.