17
2. Characteristics of a partnership are unlimited liability, co-ownership of property, limited life,
mutual agency and taxation.
4. A new partnership could be formed and the business would continue to operate without any
interruptions.
6. Salary and interest allowance are mechanisms to divide up earnings. They are not expenses.
8. Agree. The statement of partners‘ capital is a supporting statement that is used to determine
the ending balances in the partners’ capital accounts for the balance sheet.
10. Partners may require an incoming partner to pay an additional amount or bonus.
12. A partner may take more than book equity because the assets and liabilities are on the books
at book value instead of market value.
13. A. Assets are converted into cash with any loss or gain recorded.
14. The question in this case is whether Alvin is obligated to perform the terms of the contract.
SOLUTIONS TO CONCEPT CHECKS
Date Account Dr. Cr.
1.
Nov. 1 Cash
7,600
Brian Sleeper, Capital
7,600
Nov.1
Cash
Store Equipment
Ronald Hanlon, Capital
14,200
2.
Dec. 31
Income Summary
72,000
John Michael, Capital
24,000
Nicholas Paschalis, Capital
24,000
Dina Marie, Capital
24,000
3.
Dec. 31
Income Summary
72,000
John Michael, Capital
24,000
Nicholas Paschalis, Capital
26,250
Dina Marie, Capital
21,750
4.
Michael
Paschalis
Marie
Total
A.
Salary Allowance
$8,900
$7,800
$5,900
$22,600
B.
Interest on capital investments
960
1,050
870
2,880
Total Salary & Interest Allow.
$9,860
+
$8,850
+
$6,770
=
$25,480
5.
The additional income to each partner is $15,506.67
If the net income was $16,700, each partner would reduce his or her capital share
by $2,926.67
6.
May 2
Artie Offerman, Capital
4,100
Brian Miller, Capital
Copyright © 2016 Pearson Education, Inc.
17-3
CONCEPT CHECKS (CONTINUED)
7.
Pete Robinson would need to invest $4,000 in order to have one-third
interest in the law practice.
8.
Capital balance of each
partner
/ Total capital
= Profit/loss ratio
of each partner
Betty
Blackstead
$500
/ $2,300
= 5/23
Artie
Juniper
$700
/ 2,300
= 7/23
Ted Plank
$1,100
/ 2,300
= 11/23
The profit and loss ratio is 5:7:11.
Account Dr. Cr.
9.
Cash
24,000
Other Assets
18,000
Loss or Gain from Realization
6,000
Loss or Gain from Realization
6,000
Meade, Capital
2,182
Carter, Capital
1,091
Elaine, Capital
2,727
SOLUTIONS TO SET A EXERCISES
17A-1.
May
1
Cash
42
5
0
0
00
Ernie Hanlon, Capital
42
5
0
0
00
1
Cash
32
0
0
0
00
Land
30
0
0
0
00
Notes Payable
32
5
0
0
00
Carol Barnes, Capital
29
5
0
0
00
Dec.
31
Income Summary
20
0
0
0
00
A. Lot, Capital
13
1
2
0
00
B. Sharpless, Capital
6
8
8
0
00
July
31
T. DeBurgo, Capital
5
7
0
0
00
J. Eagle, Capital
3
4
0
0
00
A. Ellis, Capital
1
7
0
0
00
Cash
10
8
0
0
00
17A-4.
EXERCISES (CONTINUED)
17A-5.
Josh will receive $27,000.
Chase will receive $38,000.
Cameron will receive $39,000.
SOLUTIONS TO SET B EXERCISES
17B–1.
Mar.
1
Cash
42
0
0
0
00
Ethan Monroe, Capital
42
0
0
0
00
1
Cash
28
5
0
0
00
Land
33
0
0
0
00
Notes Payable
29
0
0
0
00
Crista Cross, Capital
32
5
0
0
00
Dec.
31
Income Summary
13
0
0
0
00
A. Lammers, Capital
8
7
9
5
00
B. Sanger, Capital
4
2
0
5
00
July
31
T. DeRocha, Capital
7
2
0
0
00
J. Eagan, Capital
3
6
0
0
00
A. Elldrege, Capital
1
8
0
0
00
Cash
12
6
0
0
00
17B-4.
Apr.
8
E. Rothe, Capital
74
0
0
0
00
P. Skou, Capital
74
0
0
0
EXERCISES (CONTINUED)
17B–5.
Savannah will receive $26,500.
Brooke will receive $30,000.
Melody will receive $32,500.
SOLUTIONS TO SET A PROBLEMS
PROBLEM 17A-1
TAMMY
MARK
TOTALS
(a)
Situation 1
$3
9
5
0
$3
9
5
0
$7
9
0
0
Situation 2
$4
6
6
8
$3
2
3
2
$7
9
0
0
Situation 3
Salary Allowance
$2
8
1
0
$2
4
1
0
$5
2
2
0
Interest Allowance
3
9
0
2
7
0
6
6
0
Total Salary and Interest Allowance
3
2
0
0
2
6
8
0
5
8
8
0
Remaining Income (Deficit) to be distributed
1
0
1
0
1
0
1
0
2
0
2
0
Share of Net Income to Partners
$4
2
1
0
$3
6
9
0
$7
9
0
0
(b)
TTotal Salary and Interest Allowance
$3
2
0
0
$2
6
8
0
5
8
8
0
Remaining Income (Deficit) to be
distributed
(
5
9
0
)
(
5
9
0
)
(1
1
8
0
)
Share of Net Income to Partners
$2
6
1
0
$2
0
9
0
$4
7
0
0
PROBLEM 17A-2
Date
Account Titles and Description
PR
Dr.
Cr.
Sit.
1
Whitney Becker, Capital
7
0
0
00
Jack Underwood, Capital
7
0
0
00
Sit.
2
Cash
1
0
5
0
00
Jack Underwood, Capital
1
0
5
0
00
Sit.
3
Cash
3
0
0
0
00
Bob Lake, Capital
6
5
0
00
Whitney Becker, Capital
6
5
0
00
Jack Underwood, Capital
1
7
0
0
00
Sit.
4
Cash
5
4
0
00
Bob Lake, Capital
1
7
0
00
Whitney Becker, Capital
1
7
0
00
Jack Underwood, Capital
8
8
0
00