A partnership began its first year of operations in 2014 with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
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Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
· Young was to be awarded an annual salary of $26,000 and $13,000 salary assigned to Thurman.
Each Partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis, respectively.
Each partner was allowed to withdraw up to $13,000 per year.
The net loss for the first year of operations, 2014, was ($26,000), and net income of $52,000 in the second year, 2015. Each partner withdrew the maximum amount from the business each year.
On 1/1/16, the partnership sold a 20% interest to Denton for $90,000 cash. This money was contributed to the business.
A. Prepare JEs for partnership on 12/31/15. (28 points)
B. Assuming the bonus method is used, prepare JEs for the partnership on 1/1/16. (10 points)
C. Assuming the revaluation (goodwill) method is used, prepare JEs for the partnership on 1/1/16. (10 points).