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
