Review Assignment for Partnerships
Using information from all activities in this unit, and any other information you can
find from the text, answer each of the following questions.
Exercises
2004
January 1 - Brady and Manning decide to start up a partnership. Brady brings in
$10 000 cash and equipment costing $60 000, with $17 000 in the accumulated
depreciation account. The fair market value of the equipment is $37 000.
Manning brings $60 000 in cash, but he is also bringing $6 000 in accounts
payable from his old business. They agree to an income ratio of 5:4. Show the
entry to establish the partnership.
December 31 - The business recorded a net income of $24 000, and Brady had
a debit balance of $16 000 in his drawings account. Show the entry to allocate
the net income to the partners' capital accounts. Prepare a Statement of
Partners' Equity for 2004.
2005
January 1 - McNabb joins the partnership. He is anxious to join, and agrees to
pay $46 000 for a 20% share of the business, with the bonus to the existing
partners. Brady, Manning and McNabb agree to salaries of $5000 for each
partner and a 5:4:3 income ratio. Show the entry to admit the new partner into
the business.
December 31 - The business recorded a net income of $30 000. Brady had
drawings of $20 000 and Manning had drawings of $4000. Show the entry to
allocate the net income to the partners'
capital accounts. Prepare a Statement of Partners' Equity for 2005.
2006
January 1 - Manning decides to leave the partnership. McNabb agrees to pay
Manning $73 000 in a private transaction. The result is that all of Manning's
equity will be transferred to McNabb. The income or loss will now be divided
between Brady and McNabb on a 50% , 50% ratio, respectively. There will be no
salary. Show the entry to record the departure of Manning.
December 31 - The business recorded a net loss of $46 000. There were no
drawings. Show the entry to allocate the net income to the partners' capital
accounts. Prepare a Statement of Partners' Equity for 2005.
2007
January 1 – The partners decide to liquidate the partnership. They have the
following balances:
Cash $12 000
Accounts Receivable $8 166
Equipment $ 110 000
Accumulated Depreciation $ 25 000
Accounts Payable $ 11 000
The partners were able to collect $3500 of the accounts receivable and sell the
equipment for $52 000. Record the entries to sell off the assets, allocate the loss
on sale to the partners and to dissolve the partnership, assuming Brady pays for
the shortfall from personal funds.