Chapter 15 – Partnerships: Formation, Operation, and Changes in Membership
P15-16 (continued)
5.
d –
Because both partners have equal capital balances, Norbert’s capital has to be
increased to equal that of Moon’s. Since Moon’s capital balance is $60,000 and
Norbert’s is $20,000, an additional $40,000 has to be credited to Norbert’s
capital to make it equal Moon’s capital. This additional amount credited to
Norbert’s capital is the goodwill that Norbert is bringing to the partnership.
6.
a –
Moon’s share of the net income of $25,000 is 60%, or $15,000.
7.
d –
Crowe and Dagwood are getting a bonus from Elman, since the amount of
Elman’s investment into the partnership exceeds the amount credited to
Elman’s capital account. The bonus should be allocated to Crowe and Dagwood
in their respective profit and loss ratio before the admission of Elman—–the old
profit and loss ratio.
8.
b –
The net income of $80,000 is allocated to Blue and Green in the following
manner:
Blue
Green
Net Income
$ 80,000
Salary allowances
$ 55,000
$45,000
(100,000)
Remainder
$ (20,000)
Allocation of the negative
remainder in the
60:40 ratio
(12,000)
(8,000)
20,000
Allocation of net income
$ 43,000
$37,000
$ -0-
9.
c –
Jill received a bonus when she retired from the partnership. The bonus is being
given to Jill by Bill and Hill, which means that the bonus is allocated to Bill’s and
Hill’s capital accounts in their respective profit and loss sharing ratio.
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