Chapter 12 – Accounting for Partnerships
Exercise 12-7 (10 minutes)
Exercise 12-8 (25 minutes)
1.
Nov. 1 Cash…………………………………………………………………90,000
Madison, Capital………………………………….……… 90,000
To record admission of Madison
[($510,000 + $90,000) x 15%].
2.
Nov. 1 Cash…………………………………………………………………120,000
Madison, Capital…………………………………………. 94,500
3.
Nov. 1 Cash…………………………………………………………………80,000
Main, Capital……………………………….……………………6,800
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Chapter 12 – Accounting for Partnerships
Exercise 12-9 (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
Exercise 12-10 (30 minutes)
a. Loss from selling assets
Total book value of assets…………………………………….... $126,000
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* 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
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Chapter 12 – Accounting for Partnerships
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
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 12-12 (20 minutes)
Rugged Sports Enterprises LP:
Return on equity: $467,681 / [($947,000 + $1,364,681)/2] = 40.5%
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Chapter 12 – Accounting for Partnerships
PROBLEM SET A
Problem 12-1A (45 minutes)
Preliminary calculations
Plan (a) & Plan (c) Percentages based on initial investments
Watts = $42,000/$105,000 = 40%
Lyon = $63,000/$105,000 = 60%
Plan (b) Percentages based on time
Watts = 0.5/1.5 = 33 1/3%
Lyon = 1.0/1.5 = 66 2/3%
Income (Loss) Year 1
Sharing Plan Calculations Watts Lyon
(a) 40% x $36,000 loss……………………………………………$(14,400)
60% x $36,000 loss…………………………………………… $(21,600)
(d) Salary allowance……………………………………………… $ 72,000
Interest allowances……………………………..……………$ 4,200 6,300
50% x ($36,000 loss + $72,000
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Chapter 12 – Accounting for Partnerships
Income (Loss) Year 2
Sharing Plan Calculations Watts Lyon
(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
Income (Loss) Year 3
Sharing Plan Calculations Watts Lyon
(a) 40% x $150,000 income……………………………………..$60,000
60% x $150,000 income…………………………………….. $ 90,000
(d) Salary allowance……………………………………………… $ 72,000
Interest allowances……………………………..……………$ 4,200 6,300
50% x ($150,000 income – $72,000
salary – $10,500 interest)………………………………… 33,750 33,750
Totals…………………………………………….…………………$37,950 $112,050
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Chapter 12 – Accounting for Partnerships
Problem 12-2A (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
3.
Dec. 31 Income Summary…………………..…………………………249,000
Kara Ries, Capital……………………………………….. 79,000
*Supporting calculations Ries Bax Thomas Total
Net income……………………………………….... $249,000
Salary allowances
Ries………………………………………………….$66,000
Bax………………………………………………….. $56,000
Thomas……..…………............................... $80,000
Total salaries………………………………………. 202,000
Balance after salary allowances…………... 47,000
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Chapter 12 – Accounting for Partnerships
Problem 12-3A (40 minutes)
Part 1
Income (Loss)
Sharing Plan Calculations Bill Bruce Barb Total
Chapter 12 – Accounting for Partnerships
For Year Ended December 31
Bill Bruce Barb Total
Beginning capital balances..............$ 0 $ 0 $ 0 $ 0
Plus
Total net income……………………….. 67,550 47,850 93,600 209,000
Total………………..…………………………..135,050 310,350 513,600 959,000
Part 3
Dec. 31 Income Summary……………………………………………..209,000
Bill Beck, Capital…………………….………………….. 67,550
Barb Beck, Capital………………………………………. 93,600
To close Income Summary.
Dec. 31 Bill Beck, Capital…………………………..………………….34,000
Bruce Beck, Capital…………………………………………..48,000
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