Accounting for Partnerships

At the end of its first year of operations on December 31, 2020, NBS Company's accounts show the following.

The capital balance represents each partners initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts

Instructions

1. Journalize the entry to record the division of net income for the year 2020 under each of the following independent assumptions.
   
   1. Net income is $30,000. Income is shared 6:3:1
   2. Net income is $40,00, Niensted and Bolen are given salary allowances of $15,000 and $10,000, respectively. The remainder is shared equally.
   3. Net income is $19,000. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,000 salary allowance. The remainder is shared equally.
2. Prepare a schedule showing the division of net income under assumption (3) above
3. Prepare a partners' capital statement for the year under assumption (3) above.

Solution