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7/28/2019 Partnership Solution Set A
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19__July 1 Cash $40,000
56,000
1 21,40089,600
Inventory 12,8009,000
$89,600
8,000
96,000$
96,000
19__
June 30 Income Summary 78,000$
a.
General Journal
Accounts PayableSam Liu,Capital
Inventory
TOTAL ASSETS
To record Liu's Investment in the partnership
Liabilities:
Tina Barton, Capital
Office EquipmentAllowance for Doubtful Accounts
Cash
Inventory
To record Barton's Investment in the partnership
TOTAL LIABILITIES & PARTNER'S EQUITY
General Journal
Accounts payable
Partner's equity
Tina Barton, capital
Sam Liu, Capital
Liabilities & Partner's Equity
Accounts receivable
Less: Allowance for doubtful accounts
Office equipment
c.
Accounts Receivable
b. BARTON AND LIU
BALANCE SHEETJuly 1, 19__
Assets
Cash
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30 32,00032,000
Tina Barton, CapitalSam Liu,Capital
Tina Barton, DrawingSam Liu,DrawingTo close the partner's drawing accounts
Tina Barton, Capital
To close the Income Summary reportSam Liu,Capital
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$96,000
8,00028,80096,000
61,400$
81,60068,800
9,000
220,800$
28,800$
192,000
220,800$
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39,000$39,000
32,00032,000
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Sales 648,960$Less: Cost of goods sold 390,960
Gross profit on sales 258,000$Operating expenses:
Selling 112,380$Administrative 91,620 20,400
Net Income 54,000$
Division of net income: Bolton Gorman TotalNet Income to be divided 54,000$Interest on Invested capitals:
Bolton ($70,000 x 0.10) 7,000$
Gorman ($60,000 x 0.10) 6,000$ (13,000)Remaining net income to be dived equally 41,000$
Bolton 20,500Gorman 20,500
Total share to each partner 27,500$ 26,500$ -$
Bolton Gorman Total
Balance, beginning of year 70,000$ 60,000$ 130,000$Add: Net Income 27,500 26,500 54,000
Subtotal 97,500$ 86,500$ 184,000$Less: Drawings 10,080 7,200 17,280
Balance, end of the year 87,420$ 79,300$ 166,720$
32,620$81,00028,200
At End of Current Year
Assets
Current assets:Cash
a. B&G DISTRIBUTORS
b. B&G DISTRIBUTORSStatement of Partner's Capital
For Current Year
Income StatementFor Current Year
b. B&G DISTRIBUTORSBalance Sheet
Accounts receivableInventory
12A-2
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3,900
145,720$
90,000$18,000
72,000
217,720$
9,600$38,5202,880
51,000$
87,420$79,300
166,720
217,720$
Less: accumulated depreciation
Total plant and equipment
Plant and equipment:Equipment
Prepaid expenses
Total current assets
Accounts payableAccrued expenses
Total assets
Liabilities & Partners' Capital
Total liabilities & partners' capital
Partners' capital:Bolton, capitalGorman, capital
Total partners' capital
Current liabilities:
Total current liabilities
Notes payable
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Dunn Pascal Net Income
45,000$22,500$
22,500$ (45,000)
22,500 22,500 -$
45,000$
6,000$
9,000$ (15,000)
30,000$
15,00015,000 (30,000)
21,000$ 24,000$ -$
45,000$
24,000$ 20,000$ (44,000) 1,000$
500500 (1,000)
24,500$ 20,500$ -$
45,000$18,000$ 26,000$ (44,000)
1,000$
6,0009,000
(15,000)
(14,000)$
(7,000)(7,000) 14,000
Dunn (50%)
Net Income to be divided
Salary allowances to partnersRemaining Income after salary allowances
Total allocated as interest allowances
(4) Salaries, Interest and fixed ratio
Net Income to be dividedSalary allowances to partners
Allocated in a fixed ratio:
Dunn (50%)Pascal (50%)
Interest allowances on beginning capitals:Dunn ($40,000 x 15%)Pascal ($60,000 x 15%)
Residual loss after salary and interest allowancesAllocated in a fixed ratio:
Total share to each partner
Pascal (50%)
Dunn (50%)Pascal (50%)
Total share to each partner
(3) Salaries, and balances in fixed ratio
Income after salary allowances
(2) Interest on capitals, and fixed ratio
Total allocated as interest allowances
Remaining Income after interest allowancesAllocated in a fixed ratio:
a. Distribution of Net Income
(1) No mention of profit sharing
Net Income to be divided
Dunn ($40,000 x 15%)
Pascal ($60,000 x 15%)
Total share to each partner
12A-3
Interest allownances on beginning capitals:
Net Income to be dividedDunn (50%)Pascal (50%)
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17,000$ 28,000$ -$
June Journal entry to close Income Summary account
45,000$
17,000$28,000$
Total share to each partner
each partner with his authorized salary and with
b.
General Journal
To close the Income Summary account by crediting
(case 4 from part a above)
Dunn, CapitalPascal, Capital
interest on invested capital and by dividing theresidual loss equally.
Income Summary
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Reed Stein Trump Net Income
554,000$
60,000$ 38,000$ (98,000)$456,000$
Reed($140,000 x 12%) 16,800$Stein($100,000 x 12%) 12,000$Trump($60,000 x 12%) 7,200$
Total allocated as interest allowances (36,000)$
420,000$
Allocated in a fixed ratio:210,000$
126,000$84,000$ (420,000)$
Total share to each partner 226,800$ 198,000$ 129,200$ -$
83,000$60,000$ 38,000$ (98,000)$
(15,000)$
Reed($140,000 x 12%) 16,800$Stein($100,000 x 12%) 12,000$Trump($60,000 x 12%) 7,200$
Total allocated as interest allowances (36,000)$
(51,000)$Allocated in a fixed ratio:
(25,500)$(15,300)$
(10,200)$ 51,000$
Total share to each partner (8,700)$ 56,700$ 35,000$ -$
(19,000)$60,000$ 38,000$ (98,000)$
(117,000)$
Reed($140,000 x 12%) 16,800$
Stein($100,000 x 12%) 12,000$Trump($60,000 x 12%) 7,200$
Total allocated as interest allowances (36,000)$
(153,000)$Allocated in a fixed ratio:
(76,500)$(45,900)$
(30,600)$ 153,000$
Total share to each partner (59,700)$ 21,600$ 14,600$ -$
Remaining Loss after salary and int allowances
Salary allowances to partners
Loss after salary allowancesInterest allownances on capitals:
Stein (30%)Trump (20%)
Distribution of Net Income
b. Net Income to be divided
Income after salary allowancesInterest allownances on capitals:
Remaining Income after salary and int allowances
Reed (50%)
12A-4
c. Loss to be dividedSalary allowances to partners
Reed (50%)Stein (30%)Trump (20%)
a. Net Income to be divided
Salary allowances to partners
Stein (30%)Trump (20%)
Loss after salary allowancesInterest allownances on capitals:
Remaining Loss after salary and int allowances
Reed (50%)
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a Kidd, Capital 120,000$
b Svenson, Capital 75,000$Kidd, Capital 60,000
45,000
c
$ 200,000Svenson, Capital($30,000 x 60%) 18,000Kidd, Capital($30,000 x 30%) 9,000
3,000
d
$ 360,000Svenson, Capital($90,000 x 60%)Kidd, Capital($90,000 x 30%)
Kohl, Capital($90,000 x 10%)Ritter, Capital
To record Ritter's admission as a partner with a one-fourth
Bonus to Ritter($360,000-$270,000 invested)
Cash
add: cash investment by RitterNet assets (owners' equity) of new partnershipRitter's interest (1/4 of $1,080,000)
Net assets (owners' equity) of old partnership
Ritter, CapitalTo record Ritter's admission as a partner with a one-fourth
interest in capital and profits upon investments of $200,000,
and to reduce existing partners' capital accounts by
proportionate share of nonus to incoming partner.
Net assets (owners' equity) of old partnership
Bonus to Ritter($230,000-$200,000 invested)
Ritter, Capital
Cash
Kohl, Capital($30,000 x 10%)
General Journal
add: cash investment by RitterNet assets (owners' equity) of new partnershipRitter's interest (1/4 of $920,000)
Ritter, Capital
Kohl, Capital
To record purchase by Ritter of one-quarter of the capital
interestsof the existin artners.
To record purchase of one-half of kidd's interest by Ritter (1/2
of $240,000)
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interest in capital and profits upon investments of $360,000,
and to divide the resulting bonus among the old partners in
their relative profit-sharing ratios prior to admission ofRitter.
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120,000$
180,000$
720,000$
200,000920,000$230,000$30,000$
230,000$
720,000$
360,0001,080,000$
270,000$90,000$
$ 54,00027,0009,000
270,000
12 A-5
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a Kim, Capital 220,000$John, Capital
b Kim, Capital 220,000$
Patents
CashJohn, Capital (5/6 of $30,000)
c Kim, Capital 220,000$John, Capital (5/6 of $30,000) 50,000
10,000CashNotes Payable,12%
Ray, Capital (1/6
To record the retirement of Partner Kim and payment of his
capital account plus a bonus of $60,000. Bonus charged
against continuing partners J ohn and ray in Ratio 5:1.
Ray, Capital
Ray, Capital (1/6 of $30,000)
To record withdrawals of Kim from firm and settlement by him
for $30,000 less than the book value of his capital account
To record transfer of three-fourths of Kim's capital to Ray and
one-fourth to ohn.
General Journal
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55,000$
165,000
100,000$
90,000
25,0005,000
100,000$180,000
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a Cash 66,400$Loss on Sale of Business 44,0006,400
Liabilities 36,800$
Cash
May, Capital 13,200$
Nix, Capital 22,0008,800
Loss on Sale of Business
May, Capital $ 30,00011,60015,200
Ca ital Loss BalanceMay $43,200 - 13,200 = $30,000Nix $33,600 - 22,000 = $11,600Peat $24,000 - 8,800 = $15,200
b Cash 35,040$Loss on Sale of Business 75,360
6,400
Liabilities 36,800$
Cash
May, Capital 22,608$
Nix, Capital 37,68015,072Peat, Capital
Accounts ReceivableAllowance for Doubtful Accounts
To pay creditors in full
To record Sale of receivables, and recognize loss
Cash ($27,200 + $66,400 - $36,800)
Partner
$56,800
To distribute cash as follows:
To pay creditors
Nix, Capital
Peat, Capital
To distribute loss among partners on 30:50:20 basis.
Peat, Capital
General Journal
To record collections on accounts receivable, and write off
balance.
Allowance for Doubtful AccountsAccounts Receivable
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Loss on Sale of Business
May, Capital $ 18,1447,296
Ca ital Loss BalanceMay $43,200 - 22,608 = $20,592 $ (2,448)Nix $33,600 - 37,680 = ($4,080) 4,080Peat $24,000 - 15,072 = $8,928 (1,632)
To distribute loss among partners on 30:50:20 basis.
* Charged to May and Peat in 30:20 ratio.
Peat, Capital
Cash ($27,200 + $35,040 - $36,800)To distribute cash as follows, assuming that Nix will be unable
to make up his deficiency:
PartnerNix's
Deficienc *
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116,800$
36,800$
44,000$
56,800$
116,800$
36,800$
12 A-7
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75,360$
25,440$
Balance$ 18,144
-7,296
25,440$
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