Exercise D-6 (25 minutes)
1a. 2015
Mar. 1 Cash………………………………………………………………... 82,500
Land………………………………………..……………….….….. 60,000
Building…………….…………………..……………….….….…100,000
1b. 2015
Oct. 20 Eckert, Withdrawals..………………………….….….….…. 34,000
Kelley, Withdrawals…………………………..……..….…... 20,000
1c. 2015
Dec. 31 Eckert, Capital………….……………..….….….….….….…. 34,000
Kelley, Capital…………………..…………………….….….… 20,000
Dec. 31 Income Summary……………..…….….…..….….….….…. 90,000
Eckert, Capital…………………..….…..….….…..….… 58,250
To close Income Summary account.*
2.
Capital account balances
Eckert
Kelley
Initial investment………….………………..
$ 82,500
$ 67,500
Ending balances……………………………
$106,750
*Supporting calculations
Eckert
Kelley
Total
Net income………………………………………………………....
$90,000
Salary allowance
Eckert……………………………………………………….….……
65,000
Interest allowances
Eckert (10% on $82,500)……….………..……....…..…....
8,250
Balance of income………..……………..……..…....…..…...
50,000
Balance allocated equally
Eckert……………………………………………………..….…….
25,000
Kelley………………………………………..…….……….………
25,000
Total allocated equally……………………………….…….….
Exercise D-7 (10 minutes)
Sept. 30 Mandy, Capital…………………..……….….….….….…..….100,000
Exercise D-8 (25 minutes)
1.
Nov. 1 Cash……………….……………….………………..……………..90,000
2.
Nov. 1 Cash………………………………………………………………...120,000
Madison, Capital…………………………………..….…. 94,500
Main, Capital……….…………………….….….….…..… 20,400
Frist, Capital…………..……………..……………………. 5,100
To record admission of Madison.
$25,500 x 20% = $5,100
3.
Nov. 1 Cash………………………………………………………………...80,000
Main, Capital…………….……………………….….….….…..6,800
Frist, Capital………………..……………..…………………….1,700
Madison, Capital…………………………………..….…. 88,500
To record admission of Madison.
Exercise D-9 (15 minutes)
1.
Jan. 31 Tulip, Capital……………………..………………….….…..….60,000
Cash…………………………..…………..………………….. 60,000
To record retirement of Tulip.
2.
Jan. 31 Tulip, Capital……………………..………………….….…..….60,000
3.
Jan. 31 Tulip, Capital……………………..………………….….…..….60,000
Hunter, Capital*……………..…………….……………… 18,750
Folgers, Capital**…………..…………….……………… 11,250
Exercise D-10 (30 minutes)
a. Loss from selling assets
Total book value of assets……………………..……………….. $126,000
Total liabilities (before liquidation)……………….….….….. $78,000
* Alternative computation
1) $28,000 = $78,000 – Cash from asset sale
b. Loss allocation
Turner Roth Lowe Total
Capital balances before
loss liquidation $ 2,500 $ 14,000 $ 31,500 $ 48,000
Allocation of loss
c. Deficiency, if any, to be covered
Each partner should pay the amount of the debit (deficit) balance in his
or her own capital account to the partnership.
Financial and Managerial Accounting, 6th Edition
696
Exercise D-11 (30 minutes)
a. Loss from selling assets
Total book value of assets……………………..……………….. $126,000
Total liabilities before liquidation…….….…..….….….…...$78,000
Loss on sale of assets………………….…………………..….… $ 76,000
b. Loss and deficit allocation
Turner Roth Lowe Total
Capital balances before loss $ 2,500 $ 14,000 $ 31,500 $ 48,000
Allocation of loss
$76,000 x 1/10……………….….. (7,600)
Capital balances after loss..... (5,100) (16,400) (6,500) $ (28,000 )
Allocation of Lowe’s deficit
to Turner and Roth
$6,500 x 1/5…………….….….…. (1,300)
c. Deficiency, if any, to be covered
As a limited partner, Lowe has no personal liability for the $28,000
Exercise D-12 (20 minutes)
Rugged Sports Enterprises LP:
Return on equity: $467,681 / [($947,000 + $1,364,681)/2] = 40.5%
PROBLEM SET A
Problem D-1A (45 minutes)
Preliminary calculations
Watts = 0.5/1.5 = 33 1/3%
Lyon = 1.0/1.5 = 66 2/3%
Plan (c) & Plan (d) Salary allowance
Lyon= 12 x $6,000 = $72,000
Income (Loss) Year 1
Sharing Plan Calculations Watts Lyon
(b) 33 1/3% x $36,000 loss……………..……………..….….…$(12,000)
66 2/3% x $36,000 loss……………..……………..….….… $(24,000)
(c) Salary allowance…………….………….…..….….…..….… $ 72,000
Totals……………………….……………..………….….….….…$(43,200) $ 7,200
(d) Salary allowance…………….………….…..….…..….….… $ 72,000
Interest allowances………………..……..…..….….….…..$ 4,200 6,300
Problem D-1A (Concluded)
Income (Loss) Year 2
Sharing Plan Calculations Watts Lyon
(b) 33 1/3% x $90,000 income……………..……………….….$30,000
66 2/3% x $90,000 income……………..……………….…. $60,000
(c) Salary allowance…………….………….…..….….…..….… $72,000
40% x ($90,000 income – $72,000 salary)…..………..…
$ 7,200
60% x ($90,000 income – $72,000 salary)…..………..…
_______ 10,800
Totals……………………….……………..………….….….….…$ 7,200 $82,800
(d) Salary allowance…………….………….…..….…..….….… $72,000
Totals……………………….……………..………….….….….…$ 7,950 $82,050
Income (Loss) Year 3
Sharing Plan Calculations Watts Lyon
(a) 40% x $150,000 income………………….……………….…$60,000
(c) Salary allowance…………….………….…..….….…..….… $ 72,000
40% x ($150,000 income – $72,000 salary).............$31,200
(d) Salary allowance……………………….….…..….….….….. $ 72,000
Interest allowances………………..……..…..….….….…..$ 4,200 6,300
50% x ($150,000 income – $72,000
Problem D-2A (50 minutes)
1.
Dec. 31 Income Summary…………………….…..….….….….….…249,000
Kara Ries, Capital………….……………..……….….... 83,000
2.
Dec. 31 Income Summary…………………….…..….….….….….…249,000
Kara Ries, Capital………….……………..……….….... 62,250
Tammy Bax, Capital……………..….….…..….….….. 87,150
3.
Dec. 31 Income Summary…………………….…..….….….….….…249,000
Kara Ries, Capital………….……………..……….….... 79,000
Salary allowances
Ries………………………………………………….$66,000
Bax………………………………………………….. $56,000
Thomas…………………..…....…..…..……..… $80,000
Total salaries………………………………………. 202,000
Balance after salary allowances………..…. 47,000
Interest allowances
Ries (10% on $80,000)………..….....…..….8,000
Bax (10% on $112,000)……….….....…..…. 11,200
Thomas (10% on $128,000)……..…....….. 12,800