Partnership Solution Set A

7/28/2019 Partnership Solution Set A

1/49

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


2/49

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


3/49

$96,000

8,00028,80096,000

61,400$

81,60068,800

9,000

220,800$

28,800$

192,000

220,800$

12 A-1


4/49

39,000$39,000

32,00032,000


5/49


6/49


7/49


8/49


9/49


10/49


11/49

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


12/49

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


13/49


14/49

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%)


(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%)


12A-3

Interest allownances on beginning capitals:

Net Income to be dividedDunn (50%)Pascal (50%)


15/49

17,000$ 28,000$ -$

June Journal entry to close Income Summary account

45,000$

17,000$28,000$


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


16/49


17/49


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22/49


23/49


24/49

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($60,000 x 12%) 7,200$


(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($60,000 x 12%) 7,200$


(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%)


25/49

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)


26/49

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.


27/49

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


28/49


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30/49


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33/49


34/49


35/49

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


36/49

55,000$

165,000

100,000$

90,000

25,0005,000

100,000$180,000

12 A-6


37/49


38/49


39/49


40/49

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


41/49

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 *


42/49

116,800$

36,800$

44,000$

56,800$

116,800$

36,800$

12 A-7


43/49

75,360$

25,440$

Balance$ 18,144

-7,296

25,440$


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Documents

Partnership Solution Set A