PROBLEM SET A
Problem D-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*.
Ries
Bax
Thomas
Total
$249,000
$66,000
$56,000
$80,000
202,000
47,000
8,000
11,200
12,800
32,000
15,000
5,000
5,000
5,000
15,000
______
______
______
$ 0
$79,000
$72,200
$97,800
Problem D-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
Financial & Managerial Accounting, 5th Edition
1464
Problem D-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 D-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 D-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 D-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.
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.
Financial & Managerial Accounting, 5th Edition
1468
Problem D-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 D-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
Financial & Managerial Accounting, 5th Edition
1470
Problem D-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 D-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
Financial & Managerial Accounting, 5th Edition
1472
Problem D-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 D-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
Financial & Managerial Accounting, 5th Edition
1474
Problem D-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 D-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.
Problem D-4B (50 minutes)
Part 1
a)
Apr. 30
Gibbs, Capital …………………………………………………..
606,000
Brady, Capital ……………………………………………..
606,000
To record admission of Brady.
b)
Apr. 30
Gibbs, Capital …………………………………………………..
606,000
Cannon, Capital…………………………………………...
606,000
To record admission of Cannon.
c)
Apr. 30
Gibbs, Capital …………………………………………………..
606,000
Cash …………………………………………………………..
606,000
To record withdrawal of Gibbs with no bonus.
Apr. 30
Gibbs, Capital …………………………………………………..
606,000
Cook, Capital* ………………………………………………...
51,200
Chan, Capital** …………………………………………...
204,800
Cash …………………………………………………………..
350,000
To record Gibbs’s withdrawal and the
bonus to old partners.
* ($606,000 – $350,000) x 1/5
**($606,000- $350,000) x 4/5
e)
Apr. 30
Gibbs, Capital …………………………………………………..
606,000
Accum. Deprec.—Manufacturing Equipment ……..
336,000
Cook, Capital*……………………………………………..
40,800
Chan, Capital** …………………………………………...
163,200
Manufacturing Equipment …………………………..
538,000
Cash …………………………………………………………..
200,000
To record withdrawal of Gibbs with
bonus to old partners.
* [$606,000 – ($538,000 – $336,000 + $200,000)] x 1/5
**[$606,000 – ($538,000 – $336,000 + $200,000)] x 4/5