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PROBLEM SET A
Problem D-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%
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
Problem D-2A (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 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 SET B
Problem D-1B (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
Problem D-2B (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 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
