Fallon and Springer formed a partnership on January 1. Fallon contributed $90,000 cash and equipment with a market value of $60,000. Springer's investment consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net income for Year 1 and Year 2 was $75,000 and $120,000, respectively.
1. Determine each partner's share of the net income for each year, assuming each of the following
independent situations:
(a) Income is divided based on the partners' failure to sign an agreement.
(b) Income is divided based on a 2:1 ratio (Fallon: Springer).
(c) Income is divided based on the ratio of the partners' original capital investments.
(d) Income is divided based on interest allowance of 12% on the original capital investments; salary allowance to Fallon of $30,000 and Springer of $25,000; and the remainder to be divided equally.
2. Prepare the journal entry to record the allocation of the Year 1 income under alternative (d) above.

Question

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The Answer of Fallon and Springer formed a partnership on January 1. Fallon contributed $90,000 cash and equipment with a market value of $60,000. Springer's investment consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net income for Year 1 and Year 2 was $75,000 and $120,000, respectively.
1. Determine each partner's share of the net income for each year, assuming each of the following
independent situations:
(a) Income is divided based on the partners' failure to sign an agreement.
(b) Income is divided based on a 2:1 ratio (Fallon: Springer).
(c) Income is divided based on the ratio of the partners' original capital investments.
(d) Income is divided based on interest allowance of 12% on the original capital investments; salary allowance to Fallon of $30,000 and Springer of $25,000; and the remainder to be divided equally.
2. Prepare the journal entry to record the allocation of the Year 1 income under alternative (d) above.

Fallon and Springer Formed a Partnership on January 1