Assignment: Partnership Scenarios
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:
I. Two partners, A and B, start a partnership.
1. Partner A's investment is the following:
a) Cash: $20,000
b) Inventory: $30,000
c) Accounts payable: $50,000
d) Computer equipment: $40,000
e) Accumulated depreciation: $20,000
2. Partner B's investment is the following:
a) Cash: $10,000
b) Computer software: $20,000
II. 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:
1. The first $20,000 is allocated on the partner's capital balances.
2. The next $30,000 is allocated based on service: Small gets $20,000, and Big gets $10,000.
3. Any remaining profits are allocated equally.
4. The partnership's net income is $100,000.
5. What is Small's portion of the net income? What is Big's portion of the net income? Make the entry for this allocation.
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.