The Prince-Robbins partnership has the following capital account balances on January 1, 2015:
Robbins, Capital 80,000
Prince is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Robbins after interest of 9 percent is given to each partner based on beginning capital balances.
On January 2, 2015, Jeffrey invests $49,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 9 percent interest is still to go to each partner.
Profits and losses will then be split as follows:
Prince (50%), Robbins (30%), and Jeffrey (20%).
In 2015, the partnership reports a net income of $19,000.
a. Prepare the journal entry to record Jeffrey entrance into the partnership on January 2, 2015. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
b. Determine the allocation of income at the end of 2015.