accounting-At the end of its first year of operations

QUESTION

At the end of its first year of operations on December 31, 2014, LAD Company’s accounts show the following: Partner Drawings Capital Roy Lachelle $23,000 $48,000 Andy Andoh 14,000 30,000 Francine Dalek 10,000 25,000 The capital balance represents each partner’s initial investment. Therefore, net income or net loss for 2014 has not been closed to the partner’s capital accounts. Instructions a. Journalize the entry to record the division of net income for the year 2014 under each of the following independent assumptions. 1. Net income is $30,000. Income is shared 6:3:1. 2. Net income is $37,000. Lachelle and Andoh are given salary allowance of $15,000 and $10,000, respectively. The remainder is shared equally. 3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Lachelle is given $12,000 salary allowance. The remainder is shared equally. b. Prepare a schedule showing the division of net income under assumption (3) above.

ANSWER:

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