1547

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).