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DQ1.
to decide how to pay the liabilities, and they will have to settle their capital accounts, just
as they would if cash were involved.
Discussion Questions
Partnerships are indeed separate entities from the partners from an accounting standpoint,
CHAPTER 12—Solutions
ACCOUNTING FOR PARTNERSHIPS
12-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Martin Steven Distributed
—
SE4. Distribution of Partnership Income
Short Exercises
Income of Partner
SE1. Partnership Characteristics
SE2. Partnership Formation
Income
Remaining Income
12-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Martin Steven Distributed
—
10,000
10,000
balance to Sania
Sania, Capital
To transfer Steven's Capital account
Steven, Capital
of Partner Income
Income (Loss)
SE5. Distribution of Partnership Income
Remaining Income
12-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Sania
Steven – =
Sania
New Capital account balances:
$12,000
SE7. Admission of a New Partner
Investment by Sania for one-fourth interest in
Sania, Capital
partnership, bonus from Martin and Steven
$1,250 $ 8,750
$7,500
$10,000
New Capital account balances:
12-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Martin Steven
3.
SE11. Types of Partnerships
c
Distribution of Cash to Partners
SE9. Withdrawal of a Partner
12-5
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
3.
4.
5.
1.
2.
3.
4.
80,000
104,000
2,000
40,000
8,000
64,000
154,000
60,000
40,000
1,000
20,000
6,000
18,000
97,000
d
a
e
Exercises: Set A
E1A. Partnership Characteristics
a
b
a
b
b
c
E2A. Partnership Advantages and Disadvantages
E3A. Partnership Formation
Accounts Payable
Original investment by Hanna Hark
Accounts Payable
Allowance for Uncollectible Accounts
Jamie Rice, Capital
Supplies
Equipment
Original investment by Jamie Rice
Cash
Accounts Receivable
Supplies
Equipment
Allowance for Uncollectible Accounts
Hanna Hark, Capital
Cash
Accounts Receivable
12-6
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
—
$100,000 $140,000 $ 240,000
to Ruben.
Computation: The partners agreed to share the income three-fifths to Shah and two-fifths
E4A. Distribution of Income
Computation: The partners share equally.
Note: Because the partnership agreement does not address the distribution of income and
losses, the law requires that income and losses be shared equally.
$240,000
Total net income
Income of Partners
Remaining Income
12-7
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
Shah Ruben Distributed
—
2.
Shah Ruben Distributed
—
Remaining Income
Income (Loss)
E5A. Distribution of Income or Losses: Salaries and Interest
Income
Computation:
Remaining Income
Income
of Partner
Computation: Income (Loss)
of Partner
12-8
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
3.
Shah Ruben Distributed
—
4.
Shah Ruben Distributed
—
of Partner
Remaining Loss
E5A. Distribution of Income or Losses: Salaries and Interest (Concluded)
Computation:
Loss
Income (Loss)
Remaining Loss
Computation: Income (Loss)
of Partner
Loss
12-9
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Average
Date × = Total Capital
=
199,360
Ankit
Distribution of income computed:
Average capital balance ratios computed:
Months
UnchangedPartner
Capital
Balance
Average capital balances computed:
*Rounded
E6A. Distribution of Income: Average Capital Balance
$320,000 0.623
=×
12-10
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
