Scribd Logo
Upload

Welcome to Scribd!

  • 26 views

    ch14 Exercises

    Uploaded by

    Ariin Tambunan
    This document summarizes the current balance sheet for a local doctors' partnership. It provides the capital balances for partners A ($20,000), B ($40,000), C ($90,000), and D ($120,000) as well as totals for assets (land $180,000, building & equipment $100,000, cash & current assets $30,000 for a total of $310,000) and liabilities ($40,000). It then provides 4 scenarios where a new partner E invests in the partnership and receives a percentage interest. It asks to calculate the new capital balances for each partner after E's investment.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    ch14 Exercises

    Uploaded by

    Ariin Tambunan
    26 views10 pages
    This document summarizes the current balance sheet for a local doctors' partnership. It provides the capital balances for partners A ($20,000), B ($40,000), C ($90,000), and D ($120,000) as well as totals for assets (land $180,000, building & equipment $100,000, cash & current assets $30,000 for a total of $310,000) and liabilities ($40,000). It then provides 4 scenarios where a new partner E invests in the partnership and receives a percentage interest. It asks to calculate the new capital balances for each partner after E's investment.

    Original Description:

    Exercises Advanced accounting chapter 14

    Original Title

    ch14 exercises

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document summarizes the current balance sheet for a local doctors' partnership. It provides the capital balances for partners A ($20,000), B ($40,000), C ($90,000), and D ($120,000) as well as totals for assets (land $180,000, building & equipment $100,000, cash & current assets $30,000 for a total of $310,000) and liabilities ($40,000). It then provides 4 scenarios where a new partner E invests in the partnership and receives a percentage interest. It asks to calculate the new capital balances for each partner after E's investment.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    26 views10 pages

    ch14 Exercises

    Uploaded by

    Ariin Tambunan
    This document summarizes the current balance sheet for a local doctors' partnership. It provides the capital balances for partners A ($20,000), B ($40,000), C ($90,000), and D ($120,000) as well as totals for assets (land $180,000, building & equipment $100,000, cash & current assets $30,000 for a total of $310,000) and liabilities ($40,000). It then provides 4 scenarios where a new partner E invests in the partnership and receives a percentage interest. It asks to calculate the new capital balances for each partner after E's investment.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 10

    the following is the current balance sheet for a local partnership of doctors:

    cash and current assets 30000 liabilities 40000


    land 180000 A, capital 20000
    building and equipment (net) 100000 B, capital 40000
    totals 310000 C, capital 90000
    D, capital 120000
    totals 310000

    a. E is going to invest enough money in this partnership to receive a 25 percent interest.


    No goodwill or bonus is to be recorded. How much should E invest?

    E investment = 25% (original capital + E investment)


    EI = 25% (270000 + EI)
    EI = 67500 + 25% EI
    75% EI = 67500
    E Investment = 90000

    b. E contributes $36,000 in cash to the business to receive a 10 percent interest in the partnership.
    Goodwill is to be recorded. Profits and losses have previously been split according to the fol-
    lowing percentages: A, 30 percent; B, 10 percent; C, 40 percent; and D, 20 percent. After E
    makes this investment, what are the individual capital balances?
    c. E contributes $42,000 in cash to the business to receive a 20 percent interest in the partnership.
    Goodwill is to be recorded. The four original partners share all profits and losses equally. After
    E makes this investment, what are the individual capital balances?

    E Investment = 20% (original capital + E investment)


    42000 + goodwill = 20 % ( 270000 + 42000 + goodwill)
    42000 + goodwill = 54000 + 8400 62400 + 0.20 goodwill
    0.80 goodwill = 20400
    Goodwill = 25500

    d. E contributes $55,000 in cash to the business to receive a 20 percent interest in the partnership.
    No goodwill or other asset revaluation is to be recorded. Profits and losses have previously
    been split according to the following percentages: A, 10 percent; B, 30 percent; C, 20 percent;
    and D, 40 percent. After E makes this investment, what are the individual capital balances?

    bonus method
    total capital after investment by E 325000
    amount acquired by E 20%
    allocation of goodwill
    A
    B
    C
    D
    16000
    bonus method we do not create the goodwill account adjust only capital balances

    130000
    prepare schedule that determines the ending capital balance for each partner as of the end of each of these three years.
    2020
    allocation of partnership net income Angela Diaz Krause Total
    Net income 70000
    interest 3000 5800 6000 14800
    net income remaining after interest 55200
    Salary 12000 9000 - 21000
    Net income (profit) distribution 34200
    remaining income (Profit) distribution 6840 13680 13680 34200
    net income allocation totals 21840 28480 19680 0

    2021
    allocation of partnership net income Angela Diaz Krause Total
    Net income 42000
    interest 3000 5800 6000 14800
    net income remaining after interest 27200
    Allowance 12000 9000 - 21000
    Net income (profit) distribution 6200
    remaining income (Profit) distribution 1240 2480 2480 6200
    net income allocation totals 16240 17280 8480 0

    2022
    allocation of partnership net income Angela Diaz Krause Total
    Net income -25000
    interest 3000 5800 6000 14800
    net income remaining after interest -39800
    Allowance 12000 9000 - 21000
    Net income (loss) distribution -60800
    remaining income (loss) distribution -18240 -30400 -12160 -60800
    net income allocation totals -3240 -15600 -6160 0
    ach of these three years.
    partner's capital
    prepare schedule that determines the ending capital balance for each partner as of the end of each of these three years.
    2021 ending balance
    allocation of partnership net income Purkerson Smith Traynor Total
    Net income 23600
    interest 6600 4000 2000 12600
    net income remaining after interest 11000
    Compensation allowance 18000 25000 8000 51000
    Net income (loss) distribution -40000
    remaining income (loss) distribution -16000 -8000 -16000 -40000
    net income allocation totals 8600 21000 -6000 0

    Purkerson - interest allocation Smith - interest allocation


    Beg balance 60000 x 3 months 180000 Beg balance 40000
    bal, apr 1 68000 x 9 months 612000
    792000
    x 1/12
    monthly average capital balance 66000 monthly average capital balance
    interest rate x 10% interest rate
    interest credited to purkerson 6600 interest credited to purkerson

    Statement of Partner's capital Purkerson Smith Traynor Total


    Beg balance 60000 40000 20000 120000
    additional contribution 8000 - - 8000
    income allocation 8600 21000 -6000 23600
    drawings 12000 12000 12000 36000
    ending balance 64600 49000 2000 115600
    of these three years.

    Traynor - interest allocation


    x 12 month 480000 Beg balance 20000 12 month 240000

    x 1/12 x 1/12
    pital balance 40000 monthly average capital balance 20000
    x 10% interest rate x 10%
    4000 interest credited to purkerson 2000
    journal entries

    a. Porthos, with permission of the other partners, decides to sell half of his partnership interest
    to D’Artagnan for $50,000 in cash. No asset revaluation or goodwill is to be recorded by the
    partnership

    Porthos, capital 35000


    D'Artagnan, capital 35000

    b. All three of the present partners agree to sell 10 percent of each partnership interest to
    D’Artagnan for a total cash payment of $25,000. Each partner receives a negotiated portion of
    this amount. Goodwill is recorded as a result of the transaction.

    250000 -
    Goodwill
    Arhos, capital
    Porthos, capital
    Aramis, capital

    bonus goes to existing partner


    58

    You might also like