EX 12-16 Partner bonuses, statement of partners’ equity
The partnership of Angel Investor Associates began operations on January 1, 2012, with contributions from two partners as follows:
Scott Wilson $120,000
Michael Goforth 80,000
The following additional partner transactions took place during the year:
1. In early January, Lance McGinnis is admitted to the partnership by contributing $50,000 cash for a 20% interest.
2. Net income of $250,000 was earned in 2012. In addition, Scott Wilson received a salary allowance of $45,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting McGinnis.
3. The partners’ withdrawals are equal to half of the increase in their capital balances from salary allowance and income.
Prepare a statement of partnership equity for the year ended December 31, 2012.
Answer:
ANGEL INVESTOR ASSOCIATES Statement of Partnership Equity For the Year Ended December 31, 2012 Total Scott Michael Lance Partner- Wilson, Goforth, McGinnis, ship Capital Capital Capital Capital Partnership capital, January 1, 2012 $120,000 $ 80,000 $200,000 Admission of Lance McGinnis.......... — — $ 50,000 50,000 Salary allowance................................ 45,000 45,000 Remaining income ............................. 98,400 65,600 41,000 205,000 Less: Partner withdrawals................. (71,700)1 (32,800)2 (20,500)3 (125,000) Partnership capital, December 31, 2012...................... $191,700 $112,800 $ 70,500 $375,000 1($45,000 + $98,400)/2 2$65,600/2 3$41,000/2
Admission of Lance McGinnis: Equity of initial partners prior to admission................. $200,000 Contribution by McGinnis .............................................. 50,000 Total.................................................................................. $250,000 McGinnis’ equity interest after admission.................... × 20% McGinnis’ equity after admission.................................. $ 50,000 Contribution by McGinnis .............................................. 50,000 No bonus.......................................................................... $ 0 Net income distribution: The income-sharing ratio is equal to the proportion of the capital balances after admitting McGinnis according to the partnership agreement:
Scott Wilson:
000,250$ 000,120$
= 48%
Michael Goforth:
000,250$ 000,80$
= 32%
Lance McGinnis:
000,250$ 000,50$
= 20%
These ratios can be multiplied by the $205,000 remaining income after the salary allowance to Wilson ($250,000 – $45,000). These amounts are credited to the respective partner capital accounts. For example, Scott Wilson: $98,400 = $205,000 × 48%.
Withdrawals: Half of the remaining income is distributed to the three partners. Wilson need not take the salary allowance as a withdrawal but may allow it to accumulate in the member equity account.
Scott Wilson $120,000
Michael Goforth 80,000
The following additional partner transactions took place during the year:
1. In early January, Lance McGinnis is admitted to the partnership by contributing $50,000 cash for a 20% interest.
2. Net income of $250,000 was earned in 2012. In addition, Scott Wilson received a salary allowance of $45,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting McGinnis.
3. The partners’ withdrawals are equal to half of the increase in their capital balances from salary allowance and income.
Prepare a statement of partnership equity for the year ended December 31, 2012.
Answer:
ANGEL INVESTOR ASSOCIATES Statement of Partnership Equity For the Year Ended December 31, 2012 Total Scott Michael Lance Partner- Wilson, Goforth, McGinnis, ship Capital Capital Capital Capital Partnership capital, January 1, 2012 $120,000 $ 80,000 $200,000 Admission of Lance McGinnis.......... — — $ 50,000 50,000 Salary allowance................................ 45,000 45,000 Remaining income ............................. 98,400 65,600 41,000 205,000 Less: Partner withdrawals................. (71,700)1 (32,800)2 (20,500)3 (125,000) Partnership capital, December 31, 2012...................... $191,700 $112,800 $ 70,500 $375,000 1($45,000 + $98,400)/2 2$65,600/2 3$41,000/2
Admission of Lance McGinnis: Equity of initial partners prior to admission................. $200,000 Contribution by McGinnis .............................................. 50,000 Total.................................................................................. $250,000 McGinnis’ equity interest after admission.................... × 20% McGinnis’ equity after admission.................................. $ 50,000 Contribution by McGinnis .............................................. 50,000 No bonus.......................................................................... $ 0 Net income distribution: The income-sharing ratio is equal to the proportion of the capital balances after admitting McGinnis according to the partnership agreement:
Scott Wilson:
000,250$ 000,120$
= 48%
Michael Goforth:
000,250$ 000,80$
= 32%
Lance McGinnis:
000,250$ 000,50$
= 20%
These ratios can be multiplied by the $205,000 remaining income after the salary allowance to Wilson ($250,000 – $45,000). These amounts are credited to the respective partner capital accounts. For example, Scott Wilson: $98,400 = $205,000 × 48%.
Withdrawals: Half of the remaining income is distributed to the three partners. Wilson need not take the salary allowance as a withdrawal but may allow it to accumulate in the member equity account.
