Appendix D – Accounting for Partnerships
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.
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.
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.
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.
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 (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
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Solutions Manual, Appendix D
25
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
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
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-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.
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