Solution E16-13

1 Income Allocation Schedule

 Kat   Edd   Total 
Net income $30,000
Bonus to Kat (1,500) 1,500 1,500
Remainder 28,500
Salary allowance (25,000) 10,000 15,000 25,000
Remainder 3,500
50/50 split (3,500) 1,750 1,750 3,500
Remainder -0- $13,250 $16,750 $30,000

2 Revenue and Expense Summary $30,000

Kat Capital $13,250
Edd Capital $16,750
Allocate partnership net income for the year to the partners.

Kat Capital $15,000

Kat Drawing $15,000
Edd Capital $10,000
Edd Drawing $10,000
Close the drawing accounts to the capital accounts.

3 Capital Accounts
K & E Partnership
Statement of Partners’ Capital
For the year ended December 31 2016

 Kat   Edd 
Capital balances January 1, 2016 $496,750 $268,250
Add: Additional investments 5,000 5,000
Deduct: Withdrawals 0 0
Deduct: Drawings (15,000) (10,000)
Add: Net income 13,250 16,750
Capital balances December 31, 2016 $500,000 $280,000

Solution E16-14

1 Revaluation on Akamu’s share of assets:

Akamu Capital $55,000

Goodwill 15,000
Cash $70,000

2 Valuation of assets and liabilities as implied by excess payment

to Box:

Equipment $ 5,000
Goodwill 70,000
Akamu capital $15,000
Nani capital 22,500
Kalena capital 22,500
Maile capital 15,000
 To record revaluation of equipment and goodwill implied by the
excess payment to Box on his retirement ($15,000 ÷ 20% = $75,000
revaluation).

Akamu capital $70,000

Cash $70,000
To record cash payment to
Akamu on his retirement from the business.

3 No revaluation; bonus to retiring partner:

Akamu capital $55,000

Nani(30/80) 5,625
Kalena(30/80) 5,625
Maile(20/80) 3,750
Cash $70,000

To record a $15,000 bonus to Akamu upon retirement.