accounting journal

Type: Individual Project

UNIT:  Partnerships

DUE DATE:  Wed, 2/22/17

DELIVERABLE LENGTH:  600–800 words + journal entries

ASSIGNMENT DESCRIPTION

Two people are starting a small IT firm. They come to you for advice on how to form a partnership. They have listed 2 scenarios and are asking you how to make journal entries for each one of the following transactions:

Two partners, A and B, start a partnership.

Partner A’s investment is the following:

Cash: $20,000

Inventory: $30,000

Accounts payable: $50,000

Computer equipment: $40,000

Accumulated depreciation: $20,000

Partner B’s investment is the following:

Cash: $10,000

Computer software: $20,000

Two partners, Small and Big, form a partnership in which Small invested $40,000 and Big invested $60,000 for a total capital of $100,000. But Small devotes more time to the business and earns more from the firm. They have agreed to share the profits as follows:

The first $20,000 is allocated on the partner’s capital balances.

The next $30,000 is allocated based on service: Small gets $20,000, and Big gets $10,000.

Any remaining profits are allocated equally.

The partnership’s net income is $100,000.

What is Small’s portion of the net income? What is Big’s portion of the net income? Make the