ASSIGNMENT #4
2. The Watson and Sink Partnership earned a net income of $90,000 for the current year. Beginning
capital balances were $70,000 for Tom Watson and $140,000 for Susan Sink. Prepare the closing
entries to transfer net income to the partners’ capital accounts based on the following independent
net income agreements.
a) No mention of net income agreement.
b) Interest on beginning capital balances of 12%, balance divided in a ratio of 3:2, respectively.
c) Interest on beginning capital balances of 10%, salary of $45,000 to Watson and $50,000 to
Sink, balance divided equally.
a)
Watson
Sink
70,000
140,000
210,000
Income Summary
Watson, Capital
Sink,
Capital
30,000
60,000
90,000
90,000
30,000
60,000
b)
Interest
Capital Balance
Income Summary
Watson, Capital
Sink,
Capital
Watson
8,400
38,800
46,800
Sink
16,800
25,920
42,270
90,000
46,800
42,720
Total
25,200
64,720
90,000
c)
Watson
7,000
45,000
-13,000
39,000
Interest
Salaries
Income Summary
Watson, Capital
Sink,
Capital
Sink
14,000
50,000
-13,000
51,000
Total
21,000
95,000
-26,000
90,000
90,000
39,000
51,000
3. The Roten and Welborn Partnership incurred a net loss of $30,000 for the current year. The beginning
capital balances of the partners were respectively, $45,000 and $55,000. Prepare journal entries to
transfer the net loss to the partners’ capital accounts based on the following agreements.
a) No mention of net income/loss agreement.
b) Salary of $40,000 to Roten and $20,000 to Welborn, balance divided in the ratio of 3:2.
c) Interest of 12% on beginning capital balances, balance divided in the ratio of 2:3.
a)
Roten
Welborn
45,000
55,000
100,000
Roten, Capital
Welborn, Capital
Income Summary
13,500
16,500
30,000
13,500
16,000
30,000
b)
Salary
Roten
40,000
-54,000
(14,000)
Roten, Capital
Welborn, Capital
Income Summary
Welborn
20,000
-36,000
(16,000)
Total
60,000
-90,000
(30,000)
14,000
16,000
30,000
c)
Interest
Capital
Roten
5,400
-16,800
(11,400)
Roten, Capital
Welborn, Capital
Income Summary
Welborn
6,600
-25,200
(18,600)
11,400
18,600
30,000
GROUP MEMBERS:
CATAYONG, YLADIA MHEYRA
CLEOPE, ALLYSA MARIE
GUIRAL, BIANCA
MARIGA, ABDUL HAKIM
SOLOMON, ERIKA JANE
Total
12,000
-42,000
(30,000)