P 16-12 Partnership income allocation  The partnership of


P 16-12 Partnership income allocation

 The partnership of Par and Boo was formed and commenced operations on March 1, 2011, with Par contributing $30,000 cash and Boo investing cash of $10,000 and equipment with an agreed-upon valuation of $20,000.

 On July 1, 2011, Boo invested an additional $10,000 in the partnership. Par made a capital withdrawal of $4,000 on May 2, 2011, but reinvested the $4,000 on October 1, 2011.

During 2011, Par withdrew $800 per month, and Boo, the managing partner, withdrew $1,000 per month. These drawings were charged to Salaries to partners. A preclosing trial balance taken at December 31, 2011, is as follows:


1. Journalize the entries necessary to close the partnership books assuming that there is no agreement regarding profit distribution.

2- a statement of partnership capital assuming that the partnership agreement provides for monthly salary allowances of $800 and $1,000 for Par and Boo, respectively, and for the division of remaining profits in relation to average capital balances

3- a profit distribution schedule for the Par and Boo partnership assuming monthly salary allowances of $800 and $1,000 for Par and Boo, respectively; interest allowances at a 12 percent annual rate on average capital balances; and remaining profits divided equally. 

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