123.
Cinema Products LP is organized as a limited partnership that sells movie props.
Information related to the capital balances is given below. Compute the partnership return
on equity.
Turner
Kelly
Total
Capital balance,
beginning of year
890,000
570,000
1,460,000
Net income for
current year
85,000
65,000
150,000
Withdrawals for
current year
40,000
25,000
65,000
124.
Caroline Meeks and Charlie Fox decide to form a partnership on August 1. Meeks invests
the following assets and liabilities in the new partnership:
Land
Building
Note payable
The note payable is associated with the building and the partnership will assume
responsibility for the loan. Fox invested $100,000 in cash and $95,000 in equipment in the
new partnership. Prepare the journal entries to record the two partners’ original
investments in the new partnership.
Land
Building
Note Payable
Cash
Equipment
C. Fox, Capital
125.
Montez and Flair formed a partnership. Montez contributed $15,000 cash and accounts
receivable worth $11,000. Flair contributed cash of $5,000; inventory valued at $16,000;
and supplies valued at $2,000. Prepare the journal entries to record each partner’s
investment in the new partnership.
126.
MacArthur, Strong, and Viet form a partnership. MacArthur contributes $190,000 cash and
Strong contributes $200,000 in cash. Viet contributes equipment worth $215,000. Prepare
the single journal entry to record the formation of this partnership.
127.
Ranger and Sol formed a partnership with capital contributions of $150,000 and $180,000,
respectively. Their partnership agreement called for Ranger to receive a $60,000 annual
salary allowance. They also agreed to allow each partner a share of income equal to 10%
of their initial capital investments. The remaining income or loss is to be divided equally. If
the net income for the current year is $110,000, what are Ranger’s and Sol’s respective
shares?
128.
Bannister invested $110,000 and Wilder invested $99,500 in a new partnership. They
agreed to an annual interest allowance of 10% on the partners’ beginning-year capital
balance, with the balance of income or loss to be divided equally. Under this agreement,
what are the income or loss shares of the partners if the annual partnership income is
$202,000?
129.
Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their
partnership agreement called for Wilder to receive a $70,000 annual salary allowance.
They also agreed to an annual interest allowance of 5% on the partners’ beginning-year
capital balance, with the balance of income or loss to be divided equally. Under this
agreement, what are the income or loss shares of the partners if the annual partnership
income is $82,000?
130.
Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their
partnership agreement called for Wilder to receive a $70,000 annual salary allowance.
Under this agreement, what are the income or loss shares of the partners if the annual
partnership income is $90,000?
131.
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.
132.
Lin and Coral invested $99,000 and $126,000, respectively, in a partnership they began
one year ago. Assuming the partnership earned $120,000 during the current year; compute
the share of the net income each partner should receive under each of these independent
assumptions.
1. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to
Coral, and any balance shared equally.
Lin
Coral
Allocated
Net Income
Salary allowance
Remainder
Allocation of remainder
Total
2. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to
Coral, interest allowance of 10% on the partners’ beginning capital balance for the year.
Lin
Coral
Allocated
Net Income
Salary allowance
Interest allowance
Remainder
Allocation of remainder
Total
Net Income
Salary allowance
(105,000)
133.
Glade, Marker, and Walters are partners with beginning-year capital balances of $100,000,
$50,000, and $50,000, respectively. Partnership net income for the year is $84,000. Make
the necessary journal entry to close Income Summary to the capital accounts if:
a. Partners agree to divide income based on their beginning-year capital balances.
b. Partners agree to divide income based on the ratio of 5:3:2 (Glade:Marker:Walters),
respectively.
c. Partnership agreement is silent as to division of income and less.
134.
Glade, Marker, and Walters are partners with beginning-year capital balances of $250,000,
$150,000, and $100,000, respectively. Partnership net income for the year is $192,000.
Make the necessary journal entry to close Income Summary to the capital accounts if
partners agree to divide income based on their beginning-year capital balances.
135.
Jakobs, Penn, and Lundt are partners with beginning–of-year capital balances of $400,000,
$320,000, and $160,000, respectively. The partners agreed to share income and loss as
follows: Salary of $30,000 to Jakobs, $50,000 to Penn, and $36,000 to Lundt. An interest
allowance of 8% on beginning–of-year capital balances. Any remaining balance is to be
divided equally. If partnership net income for the year is $190,000, determine each
partner’s share and make the appropriate journal entry to close the Income Summary to
the capital accounts.
136.
Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute
$22,000 in cash. Prepare the journal entry to record this transaction.
137.
Palmer withdraws from the FAP Partnership. The remaining partners agree to buy out her
share for her capital balance of $65,000. Prepare the journal entry to record the
withdrawal from the partnership.
138.
Lemon and Parks are partners. On October 1, Lemon’s capital balance is $75,000, and
Parks’ capital balance is $125,000. With the partnership’s approval, Parks sells ½ of his
partnership interest to Tambling for $70,000. Prepare the journal entry to record this
transaction in the partnership records.
139.
Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000
cash. Gunner has exceptional talents that will enhance the partnership. Leto’s and
Duncan’s capital account balances are $55,000 each. The partners have agreed to share
income or loss equally. Prepare the general journal entry to record the admission of
Gunner to the partnership.
140.
Conklin plans to leave the CAP Partnership. The recorded value of his capital account is
$48,000. The remaining partners Arthurs and Preston agree to pay Conklin $40,000 cash
and Conklin accepts. The partners share income and loss equally. Prepare the general
journal entry to record the withdrawal from the partnership.
141.
Conklin plans to leave the CAP Partnership. The recorded balance in her capital account is
$48,000. The remaining partners, Arthurs and Preston, agree to pay Conklin $58,000 cash
and Conklin accepts. The partners share income and loss equally. Prepare the journal
entry to record the transaction.
142.
Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for
$50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have
agreed to share income and loss equally. Prepare the journal entry to record the admission
of Sanders to the partnership.
143.
The Redtail Partnership agrees to dissolve. The remaining cash balance after liquidating
partnership assets and liabilities is $70,000. The final capital account balances are:
Paulson, $35,000; Gray, $25,000; and Chang, $10,000. Prepare the journal entry to
distribute the remaining cash to the partners.