Please prepare a submission for the following transaction in the template provided.
Year 1
On January 1, Riya and Syed entered a partnership of textile exports and imports. They agreed to distribute profits and losses in a ratio of 3:2. They contributed the following assets to the partnership:
Riya contributed $45,000 in cash.
Syed contributed equipment valued at $25,000.
On 31 December they earned a profit net income of $100,000
Year 2
On July 22, Ken joined the partnership with a bonus. Ken invested $20,000 in cash. The profit or loss agreement will be 3:2:1 once Ken is admitted.
On 31 December they earned a profit of $150,000
Year 3
On February 14, Sam was admitted to the partnership without a bonus. Partner Sam contributed $20,000 in cash. The profit or loss agreement will be 3:2:1:1 once Sam is admitted.
On 31 December they earned a profit of $175,000
After two years, on March 1, Riya decided to retire. The remaining partnership agreed to settle Riya's capital account on the basis of their revised profit and loss ratio of 2:2:1.
On 31 December the firm earned a profit of $165,000
Based on the given transaction, complete the following tasks:
Journalize the transaction.
Compute the distribution of profit and loss of the partners.
Calculate the bonus.
Calculate the contribution of partners toward the withdrawal.
Answer (1)
Answer:**Year 1*** **Initial Capital:** * Riya: $45,000 * Syed: $25,000* **Profit Sharing Ratio:** 3:2* **Net Income:** $100,000* **Profit Distribution:** * Riya: ($100,000 * 3/5) = $60,000 * Syed: ($100,000 * 2/5) = $40,000* **Ending Capital:** * Riya: $45,000 + $60,000 = $105,000 * Syed: $25,000 + $40,000 = $65,000**Year 2*** **Ken Joins:** * Ken invests $20,000* **New Profit Sharing Ratio:** 3:2:1* **Net Income:** $150,000* **Profit Distribution:** * Riya: ($150,000 * 3/6) = $75,000 * Syed: ($150,000 * 2/6) = $50,000 * Ken: ($150,000 * 1/6) = $25,000* **Ending Capital:** * Riya: $105,000 + $75,000 = $180,000 * Syed: $65,000 + $50,000 = $115,000 * Ken: $20,000 + $25,000 = $45,000**Year 3*** **Sam Joins:** * Sam invests $20,000* **New Profit Sharing Ratio:** 3:2:1:1* **Net Income:** $175,000* **Profit Distribution:** * Riya: ($175,000 * 3/7) = $75,000 * Syed: ($175,000 * 2/7) = $50,000 * Ken: ($175,000 * 1/7) = $25,000 * Sam: ($175,000 * 1/7) = $25,000* **Ending Capital:** * Riya: $180,000 + $75,000 = $255,000 * Syed: $115,000 + $50,000 = $165,000 * Ken: $45,000 + $25,000 = $70,000 * Sam: $20,000 + $25,000 = $45,000**Riya's Retirement*** **Revised Profit Sharing Ratio:** 2:2:1 (Syed, Ken, Sam)* **Riya's Capital Settlement:** * Riya's capital: $255,000 * Settlement based on 2:2:1 ratio: * Syed: ($255,000 * 2/5) = $102,000 * Ken: ($255,000 * 2/5) = $102,000 * Sam: ($255,000 * 1/5) = $51,000**Ending Capital After Riya's Retirement:*** Syed: $165,000 + $102,000 = $267,000* Ken: $70,000 + $102,000 = $172,000* Sam: $45,000 + $51,000 = $96,000mportant Note: The information provided does not include details about the year 3 ending capital. The provided information only covers the capital distribution upon Riya's retirement.
