Chapter 12: Accounting for Partnerships and Limited Liability Companies
164.
The capital accounts of Hope and Indiana have balances of $115,000 and $95,000, respectively. Clint and
Casey
are to be admitted to the partnership. Clint buys onefifth of Hope’s interest for $30,000 and onefourth
of
Indiana’s interest for $20,000. Casey contributes $45,000 cash to the partnership, for which he is to receive
ownership equity of $45,000.
Required:
(1)
Journalize the entries to record the admission of (a) Clint and (b) Casey.
(2)
What are the capital balances of each partner after the admission of the new partners?
Chapter 12: Accounting for Partnerships and Limited Liability Companies
165.
Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in
the year’s net income of $200,000 under each of the following independent assumptions:
(a)
No agreement concerning division of net income
(b)
Divided in the ratio of original capital investment
(c)
Interest at the rate of 15% allowed on original investments and the remainder divided
in
the ratio of 2:3
(d)
Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally
(e)
Allowance of interest at the rate of 15% on original investments, salary allowances of
$50,000 and $70,000, respectively, and the remainder divided equally
Chapter 12: Accounting for Partnerships and Limited Liability Companies
166.
Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in
the year’s net income of $380,000 under each of the following independent assumptions:
(a)
No agreement concerning division of net income
(b)
Divided in the ratio of original capital investment
(c)
Interest at the rate of 15% allowed on original investments and the remainder divided
in
the ratio of 2:3
(d)
Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally
(e)
Allowance of interest at the rate of 15% on original investments, salary allowances of
$50,000 and $70,000, respectively, and the remainder divided equally
Chapter 12: Accounting for Partnerships and Limited Liability Companies
167.
Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the
investment, land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk
share
net income in a 1:2 ratio.
a.
Provide the journal entry for the revaluation of land.
b.
Provide the journal entry to admit Gleason.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
168.
Gentry, sole proprietor of a hardware business, decides to form a partnership with Noel. Gentry’s accounts are as
follows:
Book Value
Market Value
Cash
$ 25,000
$ 25,000
Accounts Receivable (net)
52,000
45,000
Inventory
112,000
125,000
Land
40,000
100,000
Building (net)
300,000
340,000
Accounts Payable
25,000
25,000
Mortgage Payable
145,000
145,000
Noel agrees to contribute $80,000 for a 20% interest. Journalize the entries to record (a) Gentry’s investment and
(b) Noel’s investment.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
169.
Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a book value of $65,000 and
a
market value of $111,000. The inventory had a book value of $60,000 and a market value of $58,000. The
partnership also assumed a $52,000 note payable owned by Benson that was used originally to purchase the land.
Required:
Provide the journal entry for Benson’s contribution to the partnership.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
170.
Brad Simmons, sole proprietor of a hardware business, decides to form a partnership with Rich Winter. Brad’s
accounts are as follows:
Book Value
Market Value
Cash
$ 30,000
$ 30,000
Accounts Receivable (net)
55,000
45,000
Inventory
112,000
135,000
Land
40,000
100,000
Building (net)
500,000
540,000
Accounts Payable
25,000
25,000
Mortgage Payable
125,000
125,000
Rich agrees to contribute $170,000 for a 20% interest. Journalize the entries to record (a) Brad’s investment and (b)
Rich’s investment.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
171.
Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current
fiscal
year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively, an
allowance
of interest at 12% on the capital balances at the beginning of the year; and with the remaining net
income divided
equally. Net income for the current year was $110,000.
(a)
Present the income division section of the income statement for the current year.
(b)
Assuming that the net income had been $65,000 instead of $110,000, present
the
income division section of the income statement for the current year.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
172.
Sharp and Townson had capital balances of $60,000 and $120,000, respectively, on January 1 of the current
year.
On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson
withdrew $25,000 and $45,000, respectively. After closing all expense and revenue accounts at the end of the
year,
Income Summary has a credit balance of $90,000, which Sharp and Townson have agreed to split on a 2:1
basis.
(a)
Journalize the entries to close the income summary account and the drawing accounts.
(b)
Prepare the statement of partnership equity for the current year.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
173.
Reardon and Reese had capital balances of $140,000 and $160,000, respectively, at the beginning of the
current
fiscal year. The partnership agreement provides for salary allowances of $25,000 and $35,000,
respectively, an
allowance of interest at 12% on the capital balances at the beginning of the year, and the
remaining net income
divided equally. Net income for the current year was $120,000.
(a)
Present the income division section of the income statement for the current year.
(b)
Assuming that the net income had been $76,000 instead of $120,000, present
the
income division section of the income statement for the current year.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
174.
Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time
and
Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the
following assumptions:
(a)
No agreement as to division of net income
(b)
In ratio of capital balances
(c)
In ratio of time devoted to business
Chapter 12: Accounting for Partnerships and Limited Liability Companies
175.
Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time
and
Campbell one-half time to the business. Determine the division of $120,000 of net income under each of the
following assumptions:
(a)
No agreement as to division of net income
(b)
In ratio of capital balances
(c)
In ratio of time devoted to business
(d)
Interest of 10% on capital balances and the remainder divided equally
(e)
Interest of 10% on capital balances, salaries of $40,000 to Jackson and $20,000
to
Campbell, and the remainder divided equally
Chapter 12: Accounting for Partnerships and Limited Liability Companies
176.
Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance
with
the following agreement:
(1)
Merchandise inventory recorded in the partnership accounts at $62,500 is to be revalued
at
its current replacement price of $68,500.
(2)
Ben is to invest $48,000 in cash for a 30% interest in the partnership, which has total
net
assets (assets minus liabilities) of $130,000 after the inventory is revalued.
(3)
The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1.
Required:
(a)
Journalize the entries to record the revaluation of merchandise inventory, and the
admission
of Ben to the partnership.
(b)
A few years later, the capital balances of Derek, Hailey, and Ben were $150,000, $90,000,
and $55,000, respectively. At this time, Kacy is admitted to the partnership by the
purchase
of onehalf of Derek’s interest for $80,000. Journalize the entry to record the
admission of
Kacy to the partnership.
Chapter 12: Accounting for Partnerships and Limited Liability Companies
177.
Kala and Leah, partners in Best Designs, have capital balances of $40,000 and $60,000 respectively. Adam joins
the partnership by buying onehalf of Kala’s interest for $30,000. In addition, because of Adam’s outstanding
sales
skills, the partners agree to increase his interest to 40% if he invests another $10,000. The income-sharing
ratio of
Kala, Leah, and Adam is 4:3:1.
(a)
Journalize the entries to record the admission of Adam to the partnership.
(b)
Immediately after Adam’s admission to the partnership, Leah sells one-fourth of her interest to Denton for
$35,000. Journalize the entry to record this transaction.
178.
Amazon invested $128,000 in the Jungle and River partnership for ownership equity of $128,000. Prior to the
investment, equipment was revalued to a market value of $90,000 from a book value of $72,000. Jungle and
River
share net income in a 2:1 ratio.
Required:
a.
Provide the journal entry for the revaluation of equipment.
b.
Provide the journal entry to admit Amazon.