Exercise 12-5 (35 minutes)
Kramer Knox Total
1. Net income…………………………………………… $ 98,800
Salary allowances…………………………………$50,000 $ 40,000 90,000
Interest allowances
2. Net income…………………………………………… $ (16,800)
Salary allowances…………………………………$50,000 $ 40,000 90,000
Interest allowances
Exercise 12-6 (25 minutes)
1a. 2015
Mar. 1 Cash………………………………………………………………. 82,500
Land………………………………………………………………. 60,000
Building………………………………………………………….100,000
Long-Term Note Payable……………………………. 92,500
Eckert, Capital…………………………………………… 82,500
Kelley, Capital……………………………………………. 67,500
To record initial capital investments.
1b. 2015
2.
Capital account balances
Eckert
Kelley
Initial investment…………………………..
$ 82,500
$ 67,500
*Supporting calculations
Eckert
Kelley
Total
Net income……………………………………………………………
$90,000
Salary allowance
Eckert………………………………………………………………….
$25,000
25,000
Exercise 12-7 (10 minutes)
Sept. 30 Mandy, Capital…………………………………………………100,000
Exercise 12-8 (25 minutes)
1.
Nov. 1 Cash……………………………………………………………….90,000
2.
Nov. 1 Cash……………………………………………………………….120,000
Supporting computations
3.
Nov. 1 Cash……………………………………………………………….80,000
Main, Capital……………………………………………………6,800
Supporting computations
$510,000 + $80,000 = $590,000
Exercise 12-9 (15 minutes)
1.
2.
Jan. 31 Tulip, Capital…………………………………………………..60,000
3.
Jan. 31 Tulip, Capital…………………………………………………..60,000
Exercise 12-10 (30 minutes)
a. Loss from selling assets
Total book value of assets…………………………………….. $126,000
* Alternative computation
(This implies $50,000 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
$76,000 x 1/10………………….. (7,600)
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.
Exercise 12-11 (30 minutes)
a. Loss from selling assets
Total book value of assets…………………………………….. $126,000
Total liabilities before liquidation……………………………$78,000
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)
Allocation of Lowe’s deficit
to Turner and Roth
c. Deficiency, if any, to be covered
As a limited partner, Lowe has no personal liability for the $28,000
Exercise 12-12 (20 minutes)
Rugged Sports Enterprises LP:
Hockey LP:
Football LP:
PROBLEM SET A
Problem 12-1A (45 minutes)
Preliminary calculations
Plan (a) & Plan (c) Percentages based on initial investments
Plan (b) Percentages based on time
Plan (c) & Plan (d) Salary allowance
Plan (d) Interest allowances
Income (Loss) Year 1
Sharing Plan Calculations Watts Lyon
(a) 40% x $36,000 loss…………………………………………..$(14,400)
60% x $36,000 loss………………………………………….. $(21,600)
