Financial Accounting Exercise 12 - 5

Chapter 12 HW 12 - 5

Investment by Liam	$ 95,000
Investment by Katano	$ 105,000
Net income	$ 30,000
Annual salary allow to Liam	$ 150,000
Annual salary allow to Katano	$ -0-
Interest on init.  invest. to both	15%
Balance	1:03
Requied.1
Date		Account Titles							Debit	Credit
2014
Dec. 31		Income Summary Account							30,000
		Capital - Liam								7,500
		Capital - Katano								22,500
		To close the income summary account								30,000
		Share to Liam					Share to Katano			Total
Net income										$      30,000
Salary allowances					$    150,000					- 150,000
Balance of net income										$   (120,000)
Interest allowances:
Investment		$      95,000					$    105,000
Times interest rate		15%					15%
Interest allowances					14,250				15,750	- 30,000
Balance of net income										$   (150,000)
Allocation of balance of net income:
Balance of net income		$   (150,000)					$   (150,000)
Times share		25.00%					75.00%
Allocation of balance of net income					- 37,500				- 112,500	+ 150,000
Balance of net income										$            -0-
Allocation to each partner					$    126,750				$     (96,750)
Part 2
Capital Account Balances:
		Liam			Katano
Initial investment		$ 95,000			$ 105,000
Withdrawals		(7,000)			(24,000)
Share of income		126,750			(96,750)
Ending balances		$ 214,750			$ (15,750)