Demarco Lee invested $60,000 in the Camden and Sayler partnership for ownership equity of $60,000. Prior to the investment

Demarco Lee invested $60,000 in the Camden and Sayler partnership for ownership equity of $60,000. Prior to the investment, equipment was revalued to a market value of $39,000 from a book value of $30,000. Kevin Camden and Chloe Sayler share net income in a 2:1 ratio.

a. Provide the journal entry for the revaluation of equipment.
b. Provide the journal entry to admit Lee.


Answer:











a.
 Equipment 9,000
Kevin Camden, Capital 6,000
Chloe Sayler, Capital 3,000
($39,000 – $30,000) × 2/3.
b.
 Cash 60,000
Demarco Lee, Capital 60,000




John Prado and Ayana Nicks formed a partnership, dividing income as follows:

1. Annual salary allowance to Nicks of $38,000.
2. Interest of 5% on each partner’s capital balance on January 1.
3. Any remaining net income divided equally.

Prado and Nicks had $20,000 and $50,000, respectively, in their January 1 capital balances.

Net income for the year was $112,000.

How much net income should be distributed to Nicks?


Answer:
















Distributed to Prado and Nicks:
Prado Nicks Total
Annual salary…………………… $ 0 $38,000 $ 38,000
Interest…………………………… 1,0001 2,5002 3,500
Remaining income……………… 35,250 35,2503 70,500
Total distributed to partners… $36,250 $75,750 $112,000
1 $20,000 × 5%
2 $50,000 × 5%
3 ($112,000 – $38,000 – $3,500) × 50%
Nicks: $75,750