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Partnership Formation Ralp Hartwig and Alice Wisdom: Fair Value Carrying A

Ralph Hartwig and Alice Wisdom formed a partnership on July 1, 2012, each contributing different assets and liabilities. Hartwig contributed $30,000 cash, $180,000 land, and Alice Wisdom contributed $22,500 cash, $12,800 accounts receivable, $24,600 inventory, and $76,000 office equipment. She also brought $11,500 accounts payable and an $18,000 bank loan. During the year, Hartwig contributed an additional $12,000 cash. The partnership agreement specified a 60/40 profit sharing ratio favoring Hartwig.

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57 views8 pages

Partnership Formation Ralp Hartwig and Alice Wisdom: Fair Value Carrying A

Ralph Hartwig and Alice Wisdom formed a partnership on July 1, 2012, each contributing different assets and liabilities. Hartwig contributed $30,000 cash, $180,000 land, and Alice Wisdom contributed $22,500 cash, $12,800 accounts receivable, $24,600 inventory, and $76,000 office equipment. She also brought $11,500 accounts payable and an $18,000 bank loan. During the year, Hartwig contributed an additional $12,000 cash. The partnership agreement specified a 60/40 profit sharing ratio favoring Hartwig.

Uploaded by

chi_nguyen_100
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Partnership f

Ralp Hartwig and


Data Section :
Contribution of Assets and Liabilities on 1 July 2012
Hartwig Wisdom
Fair Value Carrying a
Cash at bank $ 30,000 $ 22,500
Account receivable - $ 12,800
Inventory - $ 24,600
Land $ 180,000 -
Office equipment - $ 76,000
Account payable - $ 11,500
Bank loan - $ 18,000

Hartwig's contribution during the year :


Cash $ 12,000

Answer to part A : Initial investment


Journal entries
Cash at Bank
Land
Hartwig Capital

Cash at Bank

Inventory

Accounts Payable

Wisdom, Capital

Answer to part B :
HARTWIG AND WISDOM
Balance Sheet
As at 1 July 2012
CURRENT ASSETS
Cash at Bank
Accounts receivable
TOTAL CURRENT ASSETS

NON-CURRENT ASSETS

Office Equipment

TOTAL NON-CURRENT
ASSETS
TOTAL ASSETS

CURRENT LIABILITIES

Bank Loan
TOTAL CURRENT
LIABILITIES
TOTAL LIABILITIES

NET ASSETS

EQUITY
Capital, R Hartwig
Capital, A Wisdom
TOTAL EQUITY
Partnership formation
Ralp Hartwig and Alice Wisdom

ilities on 1 July 2012


Wisdom
Fair Value
$ 22,500
$ 12,800
$ 23,800
-
$ 62,000
$ 11,500
$ 18,000

ring the year :

Answer to part C: using method 2

HARTWIG AND WISDOM


Statement of Changes in Partners Equity
30-Jun-13

CAPITAL

Capital balances 1 July


2012
Add: Additional
investment

Capital balances
30/6/2013
RETAINED EARNINGS
Profit allocation $56 000
x 60%

$56 000 x 40%

Less: Drawings
Balances 30/6/2013

TOTAL EQUITY
om

Partnership's profit

Hartwig Wisdom
Profits and losses ratio # 40%
Withdrawals in anticipation of profits $ 8,000 $ 16,000

using method 2
(Fixed Capital Accounts)
HARTWIG AND WISDOM
Statement of Changes in Partners Equity
30-Jun-13
Hartwig Wisdom Total
Solution File
PSHIP
Partnership: Division of Net Income

Data Section

Interest on original investment 15%


Salary - MacDuf $50,000
Salary - MacBeth 25,000
Net income 125,000

Answer Section

Division of Net Income


MacDuf MacBeth
Salary allowance
Interest allowance
Total
Excess of income over allowances
Net income
e

Net Income
Total

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