Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Exercise D-6 (25 minutes)
1a. 2015
Mar. 1
Cash ..........................................................................
82,500
Land ..........................................................................
60,000
Building ....................................................................
100,000
Long-Term Note Payable ..................................
92,500
Eckert, Capital ....................................................
82,500
Kelley, Capital ....................................................
67,500
To record initial capital investments.
1b. 2015
Oct. 20
Eckert, Withdrawals .................................................
34,000
Kelley, Withdrawals ..................................................
20,000
Cash .....................................................................
54,000
To record partners’ withdrawals.
1c. 2015
Dec. 31
Eckert, Capital ..........................................................
34,000
Kelley, Capital ...........................................................
20,000
Eckert, Withdrawals ...........................................
34,000
Kelley, Withdrawals ............................................
20,000
To close withdrawals accounts.
Dec. 31
Income Summary .....................................................
90,000
Eckert, Capital ....................................................
58,250
Kelley, Capital .....................................................
31,750
To close Income Summary account.*
2.
Capital account balances
Eckert
Kelley
Initial investment ................................
$ 82,500
$ 67,500
Withdrawals ........................................
(34,000)
(20,000)
Share of income* ................................
58,250
31,750
Ending balances ................................
$106,750
$ 79,250
*Supporting calculations
Eckert
Kelley
Total
Net income ................................................................
$90,000
Salary allowance
Eckert ................................................................
$25,000
Total salary allowance ................................
25,000
Balance of income ................................
65,000
Interest allowances
Eckert (10% on $82,500) ................................
8,250
Kelley (10% on $67,500) ................................
$ 6,750
Total interest allowances................................
15,000
Balance of income ................................
50,000
Balance allocated equally
Eckert ................................................................
25,000
Kelley ................................................................
25,000
Total allocated equally ................................
50,000
Balance of income ................................
_______
_______
$ 0
Shares of the partners ................................
$58,250
$31,750
Exercise D-7 (10 minutes)
Sept. 30
Mandy, Capital ..........................................................
100,000
Brittney, Capital ..................................................
100,000
To record admission of Brittney.
Exercise D-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
Main, Capital .......................................................
20,400
Frist, Capital .......................................................
5,100
To record admission of Madison.
Supporting computations
$510,000 + $120,000 = $630,000
$630,000 x 15% = $94,500
$120,000 - $94,500 = $25,500
$25,500 x 80% = $20,400
$25,500 x 20% = $5,100
3.
Nov. 1
Cash ..........................................................................
80,000
Main, Capital .............................................................
6,800
Frist, Capital .............................................................
1,700
Madison, Capital.................................................
88,500
To record admission of Madison.
Supporting computations
$510,000 + $80,000 = $590,000
$590,000 x 15% = $88,500
$80,000 - $88,500 = $(8,500)
$(8,500) x 80% = $(6,800)
$(8,500) x 20% = $(1,700)
Exercise D-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
Hunter, Capital* ........................................................
12,500
Folgers, Capital** .....................................................
7,500
Cash ................................................................
80,000
To record retirement of Tulip.
* (5/8 x $20,000)
**(3/8 x $20,000)
3.
Jan. 31
Tulip, Capital .............................................................
60,000
Hunter, Capital* ..................................................
18,750
Folgers, Capital** ...............................................
11,250
Cash ................................................................
30,000
To record retirement of Tulip.
* (5/8 x $30,000)
**(3/8 x $30,000)
Exercise D-10 (30 minutes)
a. Loss from selling assets
Total book value of assets .............................................
$126,000
Total liabilities (before liquidation) ...............................
$78,000
Total liabilities remaining after paying
proceeds of asset sales to creditors ..........................
(28,000)
Cash proceeds from sale of assets ...............................
(50,000)
Loss on sale of assets* ..................................................
$ 76,000
* Alternative computation
1) $28,000 = $78,000 - Cash from asset sale
(This implies $50,000 cash from asset sale)
2) Loss on sale of assets = Book value of assets - Cash received
= $126,000 - $50,000 = $76,000
b. Loss allocation
Turner
Roth
Lowe
Total
Capital balances before
loss liquidation
$ 2,500
$ 14,000
$ 31,500
$ 48,000
Allocation of loss
$76,000 x 1/10 .......................
(7,600)
$76,000 x 4/10 .......................
(30,400)
$76,000 x 5/10 .......................
______
_______
(38,000)
(76,000)
Capital balances after loss .....
$(5,100)
$(16,400)
$ (6,500)
$(28,000)
c. Deficiency, if any, to be covered
Exercise D-11 (30 minutes)
a. Loss from selling assets
Total book value of assets .............................................
$126,000
Total liabilities before liquidation ................................
$78,000
Total liabilities remaining after paying proceeds
of asset sales to creditors ............................................
(28,000)
Cash proceeds from sale of assets ...............................
(50,000)
Loss on sale of assets ....................................................
$ 76,000
b. Loss and deficit allocation
Turner
Roth
Lowe
Total
Capital balances before loss
$ 2,500
$ 14,000
$ 31,500
$ 48,000
Allocation of loss
$76,000 x 1/10 .......................
(7,600)
$76,000 x 4/10 .......................
(30,400)
$76,000 x 5/10 .......................
______
_______
(38,000)
(76,000)
Capital balances after loss .....
(5,100)
(16,400)
(6,500)
$(28,000)
Allocation of Lowe's deficit
to Turner and Roth
$6,500 x 1/5 ...........................
(1,300)
$6,500 x 4/5 ...........................
______
(5,200)
6,500
_________
Cash paid by each partner
$(6,400)
$(21,600)
$ 0
$(28,000)
c. Deficiency, if any, to be covered
As a limited partner, Lowe has no personal liability for the $28,000
liability. Therefore, Turner and Roth must share the loss reflected in
Lowe's capital account deficit as shown above.
Exercise D-12 (20 minutes)
Rugged Sports Enterprises LP:
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-1A (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-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.
