Problem: Max and Kenneth are partners in an eatery business with balances of 250,000 and 150,000, respectively.

Partne
12% interest on capital,
6,000 monthly salary for Max as managing partner,
remaining profit will be divided equally by the two partners.

a. Result of a one year operation is a net profit of 170,000 after tax.

Income Summary 170,000.00
Max, Drawing 127,000.00
Kenneth, Drawing 43,000.00
To distribute profit among partners

Max Kenneth Total

12% Interest on Capital 30,000.00 18,000.00 48,000.00
Salary to Max 72,000.00 72,000.00
Remainder Equally 25,000.00 25,000.00 50,000.00
127,000.00 43,000.00 170,000.00

OR 3 ENTRIES MAY PREPARED:

a. Income Summary 48,000.00
Max, Drawing 30,000.00
Kenneth, Drawing 18,000.00
To distribute profit in form of interest.

b. Max, Drawing 72,000.00

Income Summary 72,000.00
To distribute profit in the form of salary.

c. Income Summary 50,000.00

Max, Drawing 25,000.00
Kenneth, Drawing 25,000.00
To distribute the balance equally.

b. Result of a one year operation is a net loss of 240,000.

Max, Drawing 78,000.00
Kenneth, Drawing 162,000.00
Income Summary 240,000.00
To distribute loss among partners

Max Kenneth Total

12% Interest on Capital 30,000.00 18,000.00 48,000.00
Salary to Max 72,000.00 72,000.00
Remainder Equally (180,000.00) (180,000.00) (360,000.00)
(78,000.00) (162,000.00) (240,000.00)

OR 3 ENTRIES MAY PREPARED:

a. Income Summary 48,000.00
Max, Drawing 30,000.00
Kenneth, Drawing 18,000.00
To distribute profit in the form of interests.

b. Max, Drawing 72,000.00

Income Summary 72,000.00
To distribute profit in the form of salary

c. Max, Drawing 180,000.00

Kenneth Drawing 180,000.00
Income Summary 360,000.00
To distribute the balance equally

c. Result of a one year operation was a net profit of 120,000 before tax of 30%.
Income Summary 84,000.00
Max, Drawing 84,000.00
To record the distribution of profit

Max Kenneth Total

12% Interest on Capital 30,000.00 18,000.00 48,000.00
Salary to Max 72,000.00 72,000.00
Remainder Equally (18,000.00) (18,000.00) (36,000.00)
84,000.00 - 84,000.00

OR ENTRIES MAY BE PREPARED:

a. Income Summary 48,000.00
Max, Drawing 30,000.00
Kenneth, Drawing 18,000.00
To distribute profit in the form of interest.

b. Max, Drawing 72,000.00

Income Summary 72,000.00
To distribute profit in the form of salary

c. Max, Drawing 18,000.00

Kenneth Drawing 18,000.00
Income Summary 36,000.00
To distribute the balance equally
and 150,000, respectively. Partnership agreement calls for:

d. Result of a six-month operation was a net profit of 110,250, before tax of 30%.
Income Summary 77,175.00
Max, Drawing 59,587.50
Kenneth, Drawing 17,587.50
To distribute profit among partners

Total Max Kenneth

48,000.00 6% Interest on Capital 15,000.00 9,000.00
72,000.00 120,000.00 Salary to Max 36,000.00
50,000.00 Remainder Equally 8,587.50 8,587.50
170,000.00 59,587.50 17,587.50

OR 3 ENTRIES MAY PREPARED:

a. Income Summary 24,000.00
Max, Drawing 15,000.00
Kenneth, Drawing 9,000.00
To distribute profit in form of interest.

b. Max, Drawing 36,000.00

Income Summary 36,000.00
To distribute profit in the form of salary.

c. Income Summary 17,175.00

Max, Drawing 8,587.50
Kenneth, Drawing 8,587.50
To distribute the balance equally.

e. Result of a three-month operation was a net loss of 75,000.

Max, Drawing 27,000.00
Kenneth, Drawing 48,000.00
Income Summary 75,000.00
To distribute loss among partners

Total Max Kenneth

48,000.00 3% Interest on Capital 7,500.00 4,500.00
72,000.00 120,000.00 Salary to Max 18,000.00
(360,000.00) Remainder Equally (52,500.00) (52,500.00)
(240,000.00) (27,000.00) (48,000.00)

OR 3 ENTRIES MAY PREPARED:

 a. Income Summary 12,000.00
Max, Drawing 7,500.00
Kenneth, Drawing 4,500.00
To distribute profit in the form of interests.

b. Max, Drawing 18,000.00

Income Summary 18,000.00
To distribute profit in the form of salary

c. Max, Drawing 52,500.00

Kenneth Drawing 52,500.00
Income Summary 105,000.00
To distribute the balance equally

Total
48,000.00
72,000.00 120,000.00
(36,000.00)
84,000.00
0, before tax of 30%.

Kenneth Total
9,000.00 24,000.00
36,000.00 60,000.00
8,587.50 17,175.00
17,587.50 77,175.00

Kenneth Total
4,500.00 12,000.00
18,000.00 30,000.00
(52,500.00) (105,000.00)
(48,000.00) (75,000.00)