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Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 12
Chapter 12
Accounting for Partnerships
QUESTIONS
1. Under the circumstances described, the death, bankruptcy, or legal inability of a
partner to execute a contract ends a partnership. In addition, if a partnership is
3. All partners in a general partnership have unlimited liability. A limited partnership
4. Yes, partners can limit the right of a partner. Such an agreement is binding on
9. George's claim is not valid unless the previously agreed upon method of sharing net
incomes and losses granted George an annual salary allowance of $25,000. Unless
11. At all times in the accounting history of a partnership (or any organization), assets
must equal liabilities plus equity. When the assets are converted to cash, any gains
QUICK STUDIES
Quick Study 12-1 (10 minutes)
a. The partnership will need to pay because it is a merchandising firm.
Quick Study 12-2 (10 minutes)
Quick Study 12-3 (10 minutes)
Cash ...........................................................................................
1,000
717
Quick Study 12-4 (15 minutes)
Stolton
Bright
Total
Net income .............................................
52,000
Salary allowances
Quick Study 12-5 (10 minutes)
Quick Study 12-6 (10 minutes)
Quick Study 12-7 (10 minutes)
718
Quick Study 12-8 (10 minutes)
1.
2.
Jan. 31
Perez, Capital ............................................................
1,200
3.
Jan. 31
Perez, Capital ............................................................
1,200
Quick Study 12-9 (30 minutes)
1.
Field
Brown
Snow
Total
2. a)
b)
719
Quick Study 12-9 (concluded)
3. a)
b)
Quick Study 12-10 (15 minutes)
Total partnership return on equity = Net Income/Average equity
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 12
720
EXERCISES
Exercise 12-1 (15 minutes)
Characteristic
General Partnerships
1.
Duration of life
h. Limited
721
Exercise 12-2 (20 minutes)
a. Recommended Organization: Sharif, Henry, and Korb might first
consider organizing their business as a general partnership. However, a
problem for these new graduates is that they do not have funds and with
b. Recommended Organization: The two doctors should form a
partnership. A general partnership will have the disadvantage of
c. Recommended Organization: Munson should consider setting up a
limited partnership. Given his real estate expertise he can manage the
722
Exercise 12-3 (25 minutes)
1.
Jan. 1
Cash ..........................................................................
17,500
2.
Exercise 12-4 (30 minutes)
Cash ..........................................................................
1,000
Exercise 12-5 (30 minutes)
Ramer
Knox
Total
723
Exercise 12-6 (35 minutes)
Ramer
Knox
Total
1.
Net income ....................................................
$ 98,800
2.
Net income ....................................................
$ (16,800)
724
Exercise 12-7 (25 minutes)
1a. 2017
Mar. 1
Cash ..........................................................................
82,500
2.
Capital account balances
Eckert
Kelley
Initial investment ................................
$ 82,500
$ 67,500
*Supporting calculations
Eckert
Kelley
Total
Net income ................................................................
$90,000
Salary allowance
725
Exercise 12-8 (10 minutes)
Exercise 12-9 (25 minutes)
1.
2.
3.
Nov. 1
Cash ..........................................................................
80,000
726
Exercise 12-10 (15 minutes)
1.
2.
3.
727
Exercise 12-11 (30 minutes)
a. Loss from selling assets
b. Loss allocation
Turner
Roth
Lowe
Total
Capital balances before
loss liquidation
$ 2,500
$ 14,000
$ 31,500
$ 48,000
Exercise 12-12 (30 minutes)
a. Loss from selling assets
b. Loss and deficit allocation
Turner
Roth
Lowe
Total
Capital balances before loss
$ 2,500
$ 14,000
$ 31,500
$ 48,000
Exercise 12-13 (20 minutes)
Rugged Sports Enterprises LP:
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 12
729
PROBLEM SET A
Problem 12-1A (30 minutes)
Cash ..........................................................................................
1,000
730
Problem 12-2A (45 minutes)
Preliminary calculations
Plan (a) & Plan (c)
Percentages based on initial investments
Income (Loss)
Year 1
Sharing Plan
Calculations
Watts
Lyon
731
Problem 12-2A (Concluded)
Income (Loss)
Year 2
Sharing Plan
Calculations
Watts
Lyon
Income (Loss)
Year 3
Sharing Plan
Calculations
Watts
Lyon
732
Problem 12-3A (50 minutes)
1.
Dec. 31
Income Summary .....................................................
249,000
2.
Dec. 31
Income Summary .....................................................
249,000
3.
Dec. 31
Income Summary .....................................................
249,000
733
Problem 12-4A (40 minutes)
Part 1
Income (Loss)
Sharing Plan
Calculations
Mo
Lu
Barb
Total
(c)
Net income ................................................................
$450,000
734
Problem 12-4A (Concluded)
Part 2
MLB PARTNERSHIP
Statement of Partners' Equity
For Year Ended December 31
Mo
Lu
Barb
Total
Beginning capital balances ..............
$ 0
$ 0
$ 0
$ 0
Part 3
Dec. 31
Income Summary .....................................................
209,000
