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PROBLEM SET A
Problem 12-1A (50 minutes)
1.
Dec. 31
Income Summary .....................................................
249,000
Kara Ries, Capital ..............................................
83,000
Tammy Bax, Capital ..........................................
83,000
Joe Thomas, Capital ..........................................
83,000
To close Income Summary.
2.
Dec. 31
Income Summary .....................................................
249,000
Kara Ries, Capital ..............................................
62,250
Tammy Bax, Capital ..........................................
87,150
Joe Thomas, Capital ..........................................
99,600
To close Income Summary*.
*Supporting computations
($80,000/$320,000) x $249,000 = $62,250
($112,000/$320,000) x $249,000 = $87,150
($128,000/$320,000) x $249,000 = $99,600
3.
Dec. 31
Income Summary .....................................................
249,000
Kara Ries, Capital ..............................................
79,000
Tammy Bax, Capital ..........................................
72,200
Joe Thomas, Capital ..........................................
97,800
To close Income Summary*.
*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
Interest allowances
Ries (10% on $80,000) ...........................
8,000
Bax (10% on $112,000) ..........................
11,200
Thomas (10% on $128,000) ...................
12,800
Total interest .............................................
32,000
Bal. after interest and salaries .................
15,000
Balance allocated equally ........................
5,000
5,000
5,000
Total allocated equally .............................
15,000
Balance of income ................................
______
______
______
$ 0
Shares of the partners..............................
$79,000
$72,200
$97,800
Problem 12-2A (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%
Plan (c) & Plan (d)
Salary allowance
Lyon= 12 x $6,000 = $72,000
Plan (d)
Interest allowances
Watts = 10% x $42,000 = $ 4,200
Lyon= 10% x $63,000 = $ 6,300
Income (Loss)
Year 1
Sharing Plan
Calculations
Watts
Lyon
(a)
40% x $36,000 loss ...................................................
$(14,400)
60% x $36,000 loss ...................................................
$(21,600)
(b)
33 1/3% x $36,000 loss ................................
$(12,000)
66 2/3% x $36,000 loss ................................
$(24,000)
(c)
Salary allowance ......................................................
$ 72,000
40% x ($36,000 loss + $72,000 salary) ....................
$(43,200)
60% x ($36,000 loss + $72,000 salary) ....................
________
(64,800)
Totals ................................................................
$(43,200)
$ 7,200
(d)
Salary allowance ......................................................
$ 72,000
Interest allowances ..................................................
$ 4,200
6,300
50% x ($36,000 loss + $72,000
salary + $10,500 interest) ................................
(59,250)
(59,250)
Totals ................................................................
$(55,050)
$ 19,050
Problem 12-2A (Concluded)
Income (Loss)
Year 2
Sharing Plan
Calculations
Watts
Lyon
(a)
40% x $90,000 income ................................
$36,000
60% x $90,000 income ................................
$54,000
(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
Interest allowances ..................................................
$ 4,200
6,300
50% x ($90,000 income - $72,000
salary - $10,500 interest) ................................
3,750
3,750
Totals ................................................................
$ 7,950
$82,050
Income (Loss)
Year 3
Sharing Plan
Calculations
Watts
Lyon
(a)
40% x $150,000 income ...........................................
$60,000
60% x $150,000 income ...........................................
$ 90,000
(b)
33 1/3% x $150,000 income ................................
$50,000
66 2/3% x $150,000 income ................................
$100,000
(c)
Salary allowance ......................................................
$ 72,000
40% x ($150,000 income - $72,000 salary) .............
$31,200
60% x ($150,000 income - $72,000 salary) .............
_______
46,800
Totals ................................................................
$31,200
$118,800
(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
Problem 12-3A (40 minutes)
Part 1
Income (Loss)
Sharing Plan
Calculations
Bill
Bruce
Barb
Total
(a)
$450,000/3 ................................................................
$150,000
$150,000
$150,000
$450,000
(b)
$450,000 x ($67,500/$750,000) ................................
40,500
$450,000 x ($262,500/$750,000) ................................
157,500
$450,000 x ($420,000/$750,000) ................................
_______
_______
252,000
Total allocated ................................................................
$ 40,500
$157,500
$252,000
$450,000
(c)
Net income ................................................................
$450,000
Salary allowances ................................
$ 80,000
$ 60,000
$ 90,000
(230,000)
Balance of income ................................
220,000
Interest allowances
10% x $67,500 ................................
6,750
10% x $262,500 ................................
26,250
10% x $420,000 ................................
42,000
Total interest ................................................................
(75,000)
Bal. of income ................................................................
145,000
Balance allocated ................................
29,000
58,000
58,000
(145,000)*
Balance of income ................................
$ 0
Shares of partners ................................
$115,750
$144,250
$190,000
Problem 12-3A (Concluded)
Part 2
BBB PARTNERSHIP
Statement of Partners' Equity
For Year Ended December 31
Bill
Bruce
Barb
Total
Beginning capital balances ..............
$ 0
$ 0
$ 0
$ 0
Plus
Investments by owners ..................
67,500
262,500
420,000
750,000
Net income
Salary allowances ..........................
80,000
60,000
90,000
Interest allowances .......................
6,750
26,250
42,000
Balance allocated 20%:40%:40%*
(19,200)
(38,400)
(38,400)
Total net income ............................
67,550
47,850
93,600
209,000
Total ....................................................
135,050
310,350
513,600
959,000
Less partners' withdrawals .............
(34,000)
(48,000)
(64,000)
(146,000)
Ending capital balances ...................
$101,050
$262,350
$449,600
$813,000
*[$209,000 – ($80,000 + $60,000 + $90,000) – ($6,750 + $26,250 + $42,000)]; then allocated 20%:40%:40%.
Part 3
Dec. 31
Income Summary .....................................................
209,000
Bill Beck, Capital ................................................
67,550
Bruce Beck, Capital ............................................
47,850
Barb Beck, Capital ..............................................
93,600
To close Income Summary.
Dec. 31
Bill Beck, Capital ......................................................
34,000
Bruce Beck, Capital ..................................................
48,000
Barb Beck, Capital ....................................................
64,000
Bill Beck, Withdrawals .......................................
34,000
Bruce Beck, Withdrawals ................................
48,000
Barb Beck, Withdrawals ................................
64,000
To close withdrawals accounts.
Problem 12-4A (50 minutes)
Part 1
a)
Feb. 1
Benson, Capital ........................................................
138,000
North, Capital .....................................................
138,000
To record admission of North.
b)
Feb. 1
Benson, Capital ........................................................
138,000
Schmidt, Capital .................................................
138,000
To record admission of Schmidt.
c)
Feb. 1
Benson, Capital ........................................................
138,000
Cash ....................................................................
138,000
To record withdrawal of Benson with no bonus.
d)
Feb. 1
Benson, Capital ........................................................
138,000
Meir, Capital* ............................................................
28,500
Lau, Capital** ............................................................
47,500
Cash ....................................................................
214,000
To record withdrawal of Benson with bonus.
e)
Feb. 1
Benson, Capital ........................................................
138,000
Accumulated Depreciation—Equipment ...............
23,200
Meir, Capital* ......................................................
22,950
Lau, Capital** ......................................................
38,250
Equipment ..........................................................
70,000
Cash ....................................................................
30,000
To record withdrawal of Benson with bonus to
old partners.
* [$138,000 - ($70,000 - $23,200 + $30,000)] x 3/8.
**[$138,000 - ($70,000 - $23,200 + $30,000)] x 5/8.
Problem 12-4A (Concluded)
Part 2
a)
Feb. 1
Cash ..........................................................................
200,000
Rhodes, Capital* ................................................
200,000
To record admission of Rhodes.
*Supporting calculations
$168,000 + $138,000 + $294,000 = $600,000
($600,000 + $200,000) x 25% = $200,000
Thus, no bonus is received or granted.
b)
Feb. 1
Cash ..........................................................................
145,000
Meir, Capital ($41,250* x 3/10) ................................
12,375
Benson, Capital ($41,250* x 2/10) ...........................
8,250
Lau, Capital ($41,250* x 5/10) ................................
20,625
Rhodes, Capital ..................................................
186,250
To record Rhode’s admission and bonus.
* Supporting calculations
($600,000 + $145,000) x 25% = $186,250
$145,000 - $186,250 = $(41,250)
Thus, the new partner receives a bonus.
c)
Feb. 1
Cash ..........................................................................
262,000
Meir, Capital ($46,500* x 3/10) ...........................
13,950
Benson, Capital ($46,500* x 2/10) .....................
9,300
Lau, Capital ($46,500* x 5/10) ............................
23,250
Rhodes, Capital ..................................................
215,500
To record admission of Rhodes and bonus to old partners.
* Supporting calculations
($600,000 + $262,000) x 25% = $215,500
$262,000 - $215,500 = $46,500
Thus, the old partners receive a bonus.
Problem 12-5A (75 minutes)
Note: All entries in this problem are dated May 31.
1.
(a)
Cash ..........................................................................
600,000
Inventory .............................................................
537,200
Gain on Sale of Inventory ................................
62,800
(b)
Gain on Sale of Inventory ................................
62,800
Kendra, Capital ($62,800 x 3/6) .........................
31,400
Cogley, Capital ($62,800 x 2/6) .........................
20,933
Mei, Capital ($62,800 x 1/6) ...............................
10,467
(c)
Accounts Payable ....................................................
245,500
Cash ................................................................
245,500
(d)
Kendra, Capital ($93,000+ $31,400) ............................
124,400
Cogley, Capital ($212,500 + $20,933) .........................
233,433
Mei, Capital ($167,000 + $10,467) ...........................
177,467
Cash* ................................................................
535,300
* $180,800 + $600,000 - $245,500
2.
(a)
Cash ..........................................................................
500,000
Loss on Sale of Inventory ................................
37,200
Inventory .............................................................
537,200
(b)
Kendra, Capital ($37,200 x 3/6) ...............................
18,600
Cogley, Capital ($37,200 x 2/6) ...............................
12,400
Mei, Capital ($37,200 x 1/6) ................................
6,200
Loss on Sale of Inventory ................................
37,200
(c)
Accounts Payable ....................................................
245,500
Cash ................................................................
245,500
(d)
Kendra, Capital ($93,000 - $18,600) ........................
74,400
Cogley, Capital ($212,500 - $12,400) ......................
200,100
Mei, Capital ($167,000 - $6,200) ..............................
160,800
Cash* ................................................................
435,300
* $180,800 + $500,000 - $245,500
Problem 12-5A (Concluded)
3.
(a)
Cash ..........................................................................
320,000
Loss on Sale of Inventory .......................................
217,200
Inventory .............................................................
537,200
(b)
Kendra, Capital ($217,200 x 3/6) .............................
108,600
Cogley, Capital ($217,200 x 2/6) .............................
72,400
Mei, Capital ($217,200 x 1/6) ...................................
36,200
Loss on Sale of Inventory ................................
217,200
Cash ..........................................................................
15,600
Kendra, Capital ($93,000 - $108,600) ................
15,600
(c)
Accounts Payable ....................................................
245,500
Cash ....................................................................
245,500
(d)
Cogley, Capital ($212,500 - $72,400) ......................
140,100
Mei, Capital ($167,000 - $36,200) ............................
130,800
Cash* ...................................................................
270,900
*(180,800 + 320,000+15,600-245,500)
4.
(a)
Cash ..........................................................................
250,000
Loss on Sale of Inventory .......................................
287,200
Inventory .............................................................
537,200
(b)
Kendra, Capital ($287,200 x 3/6) .............................
143,600
Cogley, Capital ($287,200 x 2/6) .............................
95,733
Mei, Capital ($287,200 x 1/6) ...................................
47,867
Loss on Sale of Inventory ................................
287,200
Cogley, Capital ($50,600 x 2/3) ...............................
33,733
Mei, Capital ($50,600 x 1/3) .....................................
16,867
Kendra, Capital ($93,000 - $143,600) ...................
50,600
(c)
Accounts Payable ....................................................
245,500
Cash ....................................................................
245,500
(d)
Cogley, Capital*........................................................
83,034
Mei, Capital** ............................................................
102,266
Cash*** ................................................................
185,300
*$212,500 - $95,733 - $33,733
**$167,000 - $47,867 - $16,867 ***$180,800 + $250,000 - $245,500
PROBLEM SET B
Problem 12-1B (50 minutes)
1.
Dec. 31
Income Summary .....................................................
270,000
Mark Albin, Capital ............................................
90,000
Roland Peters, Capital ......................................
90,000
Sam Ramsey, Capital ........................................
90,000
To close Income Summary.
2.
Dec. 31
Income Summary .....................................................
270,000
Mark Albin, Capital ............................................
135,000
Roland Peters, Capital ......................................
81,000
Sam Ramsey, Capital ........................................
54,000
To close Income Summary.*
*Supporting computations
($164,000/$328,000) x $270,000 = $135,000
($98,400/$328,000) x $270,000 = $81,000
($65,600/$328,000) x $270,000 = $54,000
3.
Dec. 31
Income Summary .....................................................
270,000
Mark Albin, Capital ............................................
118,800
Roland Peters, Capital ......................................
88,240
Sam Ramsey, Capital ........................................
62,960
To close Income Summary.*
*Supporting calculations
Albin
Peters
Ramsey
Total
Net income ................................................
$270,000
Salary allowances
Albin .......................................................
$ 96,000
Peters .....................................................
$72,000
Ramsey ..................................................
$50,000
Total salaries ............................................
218,000
Balance after salary allowances ..............
52,000
Interest allowances
Albin (10% on $164,000) ........................
16,400
Peters (10% on $98,400) ........................
9,840
Ramsey (10% on $65,600) .....................
6,560
Total interest .............................................
32,800
Bal. after interest and salaries .................
19,200
Balance allocated equally ........................
6,400
6,400
6,400
Total allocated equally .............................
19,200
Balance of income ................................
_______
______
______
$ 0
Shares of the partners..............................
$118,800
$88,240
$62,960
Problem 12-2B (45 minutes)
Preliminary calculations
Plan (a) & Plan (c)
Percentages based on initial investments
Bell = $104,000/$260,000 = 40%
Green = $156,000/$260,000 = 60%
Plan (b)
Percentages based on time
Bell = 0.333/1.333 = 25%
Green = 1.000/1.333 = 75%
Plan (c) & Plan (d)
Salary allowance
Green = 12 x $4,000 = $48,000
Plan (d)
Interest allowances
Bell = 10% x $104,000 = $10,400
Green = 10% x $156,000 = $15,600
Income (Loss)
Year 1
Sharing Plan
Calculations
Bell
Green
(a)
40% x $36,000 loss ...................................................
$(14,400)
60% x $36,000 loss ...................................................
$(21,600)
(b)
25% x $36,000 loss ...................................................
$ (9,000)
75% x $36,000 loss ...................................................
$(27,000)
(c)
Salary allowance ......................................................
$ 48,000
40% x ($36,000 loss + $48,000 salary) ....................
$(33,600)
60% x ($36,000 loss + $48,000 salary) ....................
_______
(50,400)
Totals ................................................................
$(33,600)
$ (2,400)
(d)
Salary allowance ......................................................
$ 48,000
Interest allowances ..................................................
$ 10,400
15,600
50% x ($36,000 loss + $48,000 salary
+ $26,000 interest) ................................
(55,000)
(55,000)
Totals ................................................................
$(44,600)
$ 8,600
Problem 12-2B (Concluded)
Income (Loss)
Year 2
Sharing Plan
Calculations
Bell
Green
(a)
40% x $76,000 income .............................................
$30,400
60% x $76,000 income .............................................
$45,600
(b)
25% x $76,000 income .............................................
$19,000
75% x $76,000 income .............................................
$57,000
(c)
Salary allowance ......................................................
$48,000
40% x ($76,000 income - $48,000 salary) .................
$11,200
60% x ($76,000 income - $48,000 salary) ..................
______
16,800
Totals ................................................................
$11,200
$64,800
(d)
Salary allowance ......................................................
$48,000
Interest allowances ..................................................
$10,400
15,600
50% x ($76,000 income - $48,000 salary
- $26,000 interest) ................................
1,000
1,000
Totals ................................................................
$11,400
$64,600
Income (Loss)
Year 3
Sharing Plan
Calculations
Bell
Green
(a)
40% x $188,000 income ................................
$75,200
60% x $188,000 income ................................
$112,800
(b)
25% x $188,000 income ................................
$47,000
75% x $188,000 income ................................
$141,000
(c)
Salary allowance ......................................................
$ 48,000
40% x ($188,000 income - $48,000 salary) ................
$56,000
60% x ($188,000 income - $48,000 salary) ................
_______
84,000
Totals ................................................................
$56,000
$132,000
(d)
Salary allowance ......................................................
$ 48,000
Interest allowances ..................................................
$10,400
15,600
50% x ($188,000 income - $48,000 salary
- $26,000 interest) ................................
57,000
57,000
Totals ................................................................
$67,400
$120,600
Problem 12-3B (30 minutes)
Part 1
Income (Loss)
Sharing Plan
Calculations
Cook
Xi
Schwartz
Total
(a)
$240,000/3 ...................................................
$80,000
$ 80,000
$ 80,000
$240,000
(b)
$240,000 x ($144,000/$480,000) ....................
$72,000
$240,000 x ($216,000/$480,000) ....................
$108,000
$240,000 x ($120,000/$480,000) ....................
_______
_______
$ 60,000
Total allocated ................................
$72,000
$108,000
$ 60,000
$240,000
(c)
Net income ..................................................
$240,000
Salary allowances ................................
$40,000
$ 30,000
$ 80,000
(150,000)
Balance of income................................
90,000
Interest allowances
12% x $144,000 ................................
17,280
12% x $216,000 ................................
25,920
12% x $120,000 ................................
14,400
Total interest ................................
(57,600)
Balance of income................................
32,400
Balance allocated equally..........................
10,800
10,800
10,800
(32,400)
Balance of income................................
______
_______
_______
$ 0
Shares of partners ................................
$68,080
$ 66,720
$105,200
Problem 12-3B (Concluded)
Part 2
CXS PARTNERSHIP
Statement of Partners’ Equity
For Year Ended December 31
Cook
Xi
Schwartz
Total
Beginning capital balances .................
$ 0
$ 0
$ 0
$ 0
Plus
Investments by owners .......................
144,000
216,000
120,000
480,000
Net income
Salary allowances ................................
40,000
30,000
80,000
Interest allowances ..............................
17,280
25,920
14,400
Balance allocated equally* ..................
(40,000)
(40,000)
(40,000)
Total net income ................................
17,280
15,920
54,400
87,600
Total ......................................................
161,280
231,920
174,400
567,600
Less partner withdrawals ....................
(18,000)
(38,000)
(24,000)
(80,000)
Ending capital balance ........................
$143,280
$193,920
$150,400
$487,600
* [$87,600 – ($40,000 + $30,000 + $80,000) – ($17,280 + $25,920 + $14,400)] /3
Part 3
Dec. 31
Income Summary .....................................................
87,600
Cook, Capital ......................................................
17,280
Xi, Capital ...........................................................
15,920
Schwartz, Capital ...............................................
54,400
To close Income Summary.
Dec. 31
Cook, Capital ............................................................
18,000
Xi, Capital ................................................................
38,000
Schwartz, Capital .....................................................
24,000
Cook, Withdrawals ............................................
18,000
Xi, Withdrawals ..................................................
38,000
Schwartz, Withdrawals ......................................
24,000
To close withdrawals accounts.
