CHAPTER 13
Accounting for Partnerships and
Limited Liability Corporations
EXERCISES
Ex. 13–1
TENDER HEART GREETING CARDS INC
Statement of Stockholders’ Equity
For the Year Ended December 31, 2006
Paid-In
Common Capital in
Stock,
Excess Treasury Retained
$2 Par
of Par
Stock
Earnings
Balance, Jan. 1, 2006 ...
Issued 50,000 shares
of common stock ....
Purchased 10,000
shares as treasury
stock ........................
Net income ....................
Dividends ......................
Balance, Dec. 31, 2006 .
$500,000
$400,000
100,000
45,000
—
$1,075,000 $1,975,000
145,000
$(25,000)
$600,000
Total
$445,000 $(25,000)
(25,000)
240,000
240,000
(50,000)
(50,000)
$1,265,000 $2,285,000
Ex. 13–2
Cash .....................................................................................
Accounts Receivable ..........................................................
Merchandise Inventory .......................................................
Equipment............................................................................
Allowance for Doubtful Accounts ................................
Todd Jost, Capital ..........................................................
6,000
91,000
76,500
90,000
8,000
255,500
Ex. 13–3
a.
b.
c.
d.
........................................................................................
........................................................................................
........................................................................................
........................................................................................
1
Moore
Knell
$60,000
80,000
57,600
55,000
$60,000
40,000
62,400
65,000
e.
........................................................................................
61,000
59,000
Details
Moore
Knell
Total
a. Net income (1:1) ..........................................
$60,000
$60,000
$120,000
b. Net income (2:1) ..........................................
$80,000
$40,000
$120,000
c. Interest allowance .......................................
Remaining income (2:3) .............................
Net income ..................................................
$24,000
33,600
$57,600
$12,000
50,400
$62,400
$ 36,000
84,000
$120,000
d. Salary allowance .........................................
Remaining income (1:1) .............................
Net income ..................................................
$40,000
15,000
$55,000
$50,000
15,000
$65,000
$ 90,000
30,000
$120,000
e. Interest allowance .......................................
Salary allowance .........................................
Excess of allowances over income (1:1) ..
Net income ..................................................
$24,000
40,000
(3,000)
$61,000
$12,000
50,000
(3,000)
$59,000
$ 36,000
90,000
(6,000)
$120,000
Moore
Knell
Ex. 13–4
a.
b.
c.
d.
e.
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
$ 90,000
120,000
81,600
85,000
91,000
$90,000
60,000
98,400
95,000
89,000
Details
Moore
Knell
Total
a. Net income (1:1) ................................................
$ 90,000
$90,000
$180,000
b. Net income (2:1) ................................................
$120,000
$60,000
$180,000
c. Interest allowance .............................................
Remaining income (2:3) ...................................
Net income ........................................................
$ 24,000
57,600
$ 81,600
$12,000
86,400
$98,400
$ 36,000
144,000
$180,000
d. Salary allowance ...............................................
Remaining income (1:1) ...................................
Net income ........................................................
$ 40,000
45,000
$ 85,000
$50,000
45,000
$95,000
$ 90,000
90,000
$180,000
e. Interest allowance .............................................
$ 24,000
$12,000
$ 36,000
2
Salary allowance ...............................................
Remaining income (1:1) ...................................
Net income ........................................................
40,000
27,000
$ 91,000
50,000
27,000
$89,000
90,000
54,000
$180,000
Ex. 13–5
Salary allowances ..........................................
Remainder ($120,000)(net loss, $20,000
plus $100,000 salary allowances)
divided equally ..........................................
Net loss ...........................................................
Jane
Williams
Y.
Osaka
$ 40,000
$ 60,000
$ 100,000
(60,000)
$ (20,000)
(60,000)
$
0
(120,000)
$ (20,000)
Total
Ex. 13–6
The partners can divide net income in any ratio that they wish. However, in the absence of an agreement, net income is divided equally between the partners. Therefore, Jim’s conclusion was correct, but for the wrong reasons. In addition, note that
the salary allowances have no impact on the division of income.
Ex 13–7
a.
Net income: $106,000
Salary allowance ............................................
Remaining income .........................................
Net income ......................................................
Bennings
Hodges
Total
$32,000
12,600
$44,600
$53,000
8,400
$61,400
$ 85,000
21,000
$106,000
Bennings remaining income: ($106,000 – $85,000) × (3/5)
Hodges remaining income: ($106,000 – $85,000) × (2/5)
b.
(1)
Income Summary ................................................................
L. Bennings, Member Equity .........................................
L. Hodges, Member Equity ............................................
3
106,000
44,600
61,400
(2)
L. Bennings, Member Equity ..............................................
L. Hodges, Member Equity .................................................
L. Bennings, Drawing ....................................................
L. Hodges, Drawing .......................................................
32,000
53,000
32,000
53,000
Note: The reduction in members’ equity from withdrawals would be disclosed on
the statement of members’ equity but does not affect the allocation of net income
in part (a) of this exercise.
Ex 13–8
a.
Salary allowance ......................
Interest allowance (8%) ............
Total allowances.......................
Remaining income (4:3:3)........
Net income ................................
WXXY Radio
Partners
John
Higgins
Daily Call
Newspaper,
LLC
$ 12,800
$ 12,800
217,840
$230,640
$125,000
7,600
$132,600
163,380
$295,980
$ 20,000
$ 20,000
163,380
$183,380
Total
$125,000
40,400
$165,400
544,600
$710,000
b.
Dec. 31, 2006
Dec. 31, 2006
Income Summary..........................................
WXXY Radio Partners, Member Equity .
John Higgins, Member Equity ................
Daily Call Newspaper, LLC, Member
Equity ..................................................
710,000
WXXY Radio Partners, Member Equity .......
John Higgins, Member Equity .....................
Daily Call Newspaper, LLC, Member Equity
WXXY Radio Partners, Drawing .............
John Higgins, Drawing ...........................
Daily Call Newspaper, LLC, Drawing .....
12,800
132,600
20,000
230,640
295,980
183,380
12,800
132,600
20,000
c.
MEDIA PROPERTIES, LLC
Statement of Members’ Equity
For the Year Ended December 31, 2006
WXXY
Radio
Partners
Daily Call
John Newspaper,
Higgins
LLC
Total
Members' equity, January 1, 2006 ......... $160,000 $ 95,000 $250,000 $ 505,000
4
Additonal investment during the year ...
50,000
50,000
$210,000 $ 95,000 $250,000 $ 555,000
Net income for the year .......................... 230,640 295,980 183,380
710,000
$440,640 $390,980 $433,380 $1,265,000
Withdrawals during the year ..................
12,800 132,600
20,000
165,400
Members' equity, December 31, 2006 .... $427,840 $258,380 $413,380 $1,099,600
Ex. 13–9
a.
(1)
(2)
Income Summary .........................................................
Walt Bigney, Capital ...............................................
Dan Harris, Capital ..................................................
160,000
Walt Bigney, Capital .....................................................
Dan Harris, Capital .......................................................
Walt Bigney, Drawing .............................................
Dan Harris, Drawing................................................
72,000
84,000
80,000
80,000
72,000
84,000
b.
BIGNEY AND HARRIS
Statement of Partners’ Equity
For the Year Ended December 31, 2006
Capital, January 1, 2006.................................
Additional investment during the year .........
Net income for the year .................................
Withdrawals during the year .........................
Capital, December 31, 2006 ...........................
Walt
Bigney
Dan
Harris
Total
$ 80,000
10,000
$ 90,000
80,000
$170,000
72,000
$ 98,000
$ 95,000
—
$ 95,000
80,000
$175,000
84,000
$ 91,000
$175,000
10,000
$185,000
160,000
$345,000
156,000
$189,000
Ex 13–10
a.
Jan. 31
Partner Drawing ...................................
Cash ................................................
20,000,000
Income Summary.................................
Partner Capital................................
200,000,000
20,000,000
b.
Dec. 31
5
200,000,000
c.
Dec. 31
Partner Capital .....................................
Partner Drawing .............................
240,000,000*
240,000,000
*12 months × 20,000,000
d.
Dec. 31
Cash......................................................
Partner Capital................................
40,000,000
40,000,000
During the year, the partners withdrew 40 million pounds more than what was
earned. This represents a distribution of capital beyond the current year’s earnings.
According to the operating agreement, this difference must be returned to the partnership.
Ex. 13–11
a. and b.
Kirk, Capital ...................................................................
McCoy, Capital..........................................................
30,000
30,000
Ex. 13–12
a.
$811,000 ($1,840,000,000  2,270), rounded
b. $132,000 ($300,000,000  2,270), rounded
c. A new partner might contribute more than $132,000 because of goodwill attributable to the firm’s reputation, future income potential, a strong client base, etc.
Ex. 13–13
a.
b.
(1) Susan Yu, Capital....................................................
Ben Hardy, Capital ..................................................
Ken Mahl ............................................................
25,000
18,000
(2) Cash .........................................................................
Jeff Wood, Capital .............................................
35,000
Susan Yu .......................................................................
Ben Hardy .....................................................................
Ken Mahl .......................................................................
Jeff Wood ......................................................................
75,000
72,000
43,000
35,000
6
43,000
35,000
Ex. 13–14
a.
b.
Cash ..............................................................................
Cecil Jacobs, Capital ...................................................
Maria Estaban, Capital .................................................
Lee White, Capital ....................................................
45,000
5,000
5,000
Cecil Jacobs .................................................................
Maria Estaban ...............................................................
Lee White ......................................................................
56,000
54,000
55,000
55,000
Ex. 13–15
a. Conway, Member Equity ................................................
Patel, Member Equity......................................................
Medical Equipment ....................................................
1$14,000
2$14,000
5,6001
8,4002
14,000
 2/5 = $5,600
 3/5 = $8,400
b. 1. Cash ............................................................................
Conway, Member Equity ......................................
Patel, Member Equity ...........................................
Truet, Member Equity...........................................
340,000
20,080
30,120
289,800
Supporting calculations for the bonus:
Equity of Conway ......................................
Equity of Patel............................................
Contribution by Truett ...............................
Total equity after admitting Truett ...........
Truett’s equity interest after admission ..
Truett’s equity after admission ................
$294,400
331,600
340,000
$966,000
30%
$289,800
Contribution by Truett ...............................
Truett’s equity after admission ................
Bonus paid to Conway and Patel .............
$340,000
289,800
$ 50,200
Conway: $50,200  2/5 = $20,080
Patel: $50,200  3/5 = $30,120
b. 2. Cash ............................................................................
Conway, Member Equity ...........................................
Patel, Member Equity ................................................
Truet, Member Equity...........................................
Supporting calculations for the bonus:
Equity of Conway ......................................
7
$294,400
190,000
8,864
13,296
212,160
Equity of Patel............................................
Contribution by Truett ...............................
Total equity after admitting Truett ...........
Truett’s equity interest after admission ..
Truett’s equity after admission ................
Contribution by Truett ...............................
Bonus paid to Truett .................................
331,600
190,000
$816,000
26%
$212,160
190,000
$ 22,160
Conway: $22,160  2/5 = $8,864
Patel: $22,160  3/5 = $13,296
Ex 13–16
ANGEL INVESTOR ASSOCIATES
Statement of Partnership Equity
For the Year Ended December 31, 2006
Jan
Strous,
Capital
Cara
Wright,
Capital
Michael
Black,
Capital
Total
Partnership
Capital
Partnership Capital, January 1, 2006 ........ $ 31,500 $ 58,500 $
$ 90,000
Revaluation of assets ................................
(3,500)
(6,500)
(10,000)
Admission of Michael Black ......................
2,800
5,200
22,000
30,000
Salary allowance ........................................ 12,000
12,000
Remaining income ..................................... 44,800
83,200
32,000 160,000
Less: Partner withdrawals ......................... (28,400) (41,600) (16,000) (86,000)
Partnership Capital, December 31, 2006 .. $ 59,200 $ 98,800 $ 38,000 $196,000
Supporting Calculations
Income-sharing ratio prior to admitting Black:
Jan Strous:
$31,500
= 35%
$90,000
Cara Wright:
$58,500
= 65%
$90,000
Revaluation of assets:
Jan Strous: $10,000  35% = $3,500 reduction in capital account
Cara Wright: $10,000  65% = $6,500 reduction in capital account
8
Ex. 13–16
Concluded
Admission of Michael Black:
Equity of initial partners prior to admission .................
Contribution by Black .....................................................
Total..................................................................................
Black's equity interest after admission .........................
Black's equity after admission .......................................
$ 80,000
30,000
$110,000
20%
$ 22,000
Contribution by Black .....................................................
Black's equity after admission .......................................
Bonus paid to Strous and Wright ..................................
$ 30,000
22,000
$ 8,000
The bonus is distributed to Strous and Wright according to their income-sharing ratio prior to admitting Black:
Strous: $8,000  35% = $2,800
Wright: $8,000  65% = $5,200
Net income distribution:
The revised income-sharing ratio is equal to the proportion of the capital balances
after admitting Black according to the partnership agreement:
Jan Strous:
$30,800
= 28%
$110,000
Cara Wright:
$57,200
= 52%
$110,000
Michael Black:
$22,000
= 20%
$110,000
Alternatively, the original income-sharing ratios for Strous and Wright could be multiplied by 80% (100% less the 20% sold to Black) to obtain 28% and 52%, respectively. Leaving 20% for Black.
These ratios can be multiplied by the $160,000 remaining income ($172,000 – $12,000
salary allowance to Strous) to distribute the earnings to the respective partner capital accounts.
Withdrawals:
Half of the income distribution for Wright and Black and half of the income distribution plus salary allowance for Strous. Strous need not take the salary allowance as a
withdrawal but may allow it to accumulate in the member equity account.
9
Ex. 13–17
a.
b.
Merchandise Inventory ................................................
Allowance for Doubtful Accounts .........................
Glenn Otis, Capital ..................................................
Tammie Sawyer, Capital .........................................
Joe Parrott, Capital .................................................
15,000
Glenn Otis, Capital .......................................................
Cash .........................................................................
Notes Payable .........................................................
205,100
3,100
5,100
3,400
3,400
55,100
150,000
Ex. 13–18
a.
The income-sharing ratio is determined by dividing the net income for each
member by the total net income. Thus, in 2005 the income-sharing ratio is as follows:
Golden Properties, LLC:
Aztec Holdings, Ltd.:
$50,000
= 40%
$125,000
$75,000
= 60%
$125,000
Or a 2:3 ratio
b. Following the same procedure as in (a):
Golden Properties, LLC:
Aztec Holdings, Ltd.:
Jason Fields:
Ex. 13–18
c.
$106,880
= 32%
$334,000
$160,320
= 48%
$334,000
$66,800
= 20%
$334,000
Concluded
The member withdrawal ratios do not match the income-sharing ratio, shown as
follows:
$32,000
Golden Properties, LLC:
= 24.6%
$130,000
10
Aztec Holdings, Ltd.:
Jason Fields:
$48,000
= 36.9%
$130,000
$50,000
= 38.5%
$130,000
Clearly, the distribution to Jason Fields is disproportionably higher while the distributions to Golden Properties and Aztec Holdings are lower than their respective income-sharing ratios. Distributions need not be in the same proportion as
the income-sharing ratio. Members may make withdrawals from the business as
long as their member equity remains positive and the operating agreement allows such withdrawals.
d. Jason Fields provided a $183,750 cash contribution to the business. The amount
credited to his member equity account is this amount plus his bonus ($20,000),
or $203,750.
e.
The negative entries to Golden Properties and Aztec Holdings are the result of a
bonus paid to Jason Fields.
f.
Jason Fields acquired a 20% interest in the business, computed as follows:
Jason Fields’ member equity after admission ..
Golden Properties, LLC, member equity ...........
Aztec Holdings, Ltd. member equity ..................
Total ......................................................................
$ 203,750
332,000
483,000
$1,018,750
Fields’ ownership interest after admission
($203,750 ÷ $1,018,750) .......................................
20.00%
Ex. 13–19
a.
Cash balance .................................................
Sum of capital accounts ...............................
Loss from sale of noncash assets ...............
$ 20,000
25,000
$ 5,000
b. and c.
Capital balances before realization ..............
Division of loss on sale of noncash assets
Balances .........................................................
Cash distributed to partners.........................
11
Hires
Bellman
$ 5,000
2,500
$ 2,500
2,500
$ 20,000
2,500
$ 17,500
17,500
Final balances ................................................
$
0
$
0
Ex. 13–20
Capital balances before realization ....................
Division of loss on sale of noncash assets
($97,000 – $67,000) ...........................................
Capital balances after realization........................
Cash distributed to partners ...............................
Final balances ......................................................
Goldburg
Luce
$ 57,000
$ 40,000
15,000
$ 42,000
42,000
$
0
15,000
$ 25,000
25,000
$
0
Ex. 13–21
a.
Deficiency
b.
$60,000 ($20,000 + $57,500 – $17,500)
c.
Cash ...............................................................................
Nell, Capital ...............................................................
Capital balances after realization .......
Receipt of partner deficiency .............
Capital balances after eliminating
deficiency........................................
17,500
17,500
Bakki
Towers
Nell
$ 20,000
$ 57,500
$(17,500) Dr.
17,500
$ 20,000
$ 57,500
$
0
Ex. 13–22
a.
Cash should be distributed as indicated in the following tabulation:
Capital invested ................................
Net income ........................................
Capital balances and cash
distribution ....................................
b.
Meyer
Ball
David
Total
$ 175
+ 100
$ 125
+ 100
$ —
+ 100
$ 300
+ 300
$ 275
$ 225
$ 100
$ 600
David has a capital deficiency of $60, as indicated in the following tabulation:
Capital invested ................................
Net loss .............................................
12
Meyer
Ball
David
Total
$ 175
– 60
$ 125
– 60
$ —
– 60
$ 300
– 180
Capital balances ...............................
$ 115
$ 65
$ 60 Dr.
$ 120
Ex. 13–23
Capital balances after realization..............
Distribution of partner deficiency .............
Capital balances after deficiency
distribution ...........................................
13
Duncan
Tribe
Ho
$(15,000)
15,000
$ 50,000
(10,000)
$ 40,000
(5,000)
$
$ 40,000
$ 35,000
0
Ex. 13–24
GIBBS, HILL, AND MANSON
Statement of Partnership Liquidation
For the Period Ending July 1–29, 20—
Capital
Cash
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment of
liabilities ........................................
Distribution of cash to partners ......
Final balances ..................................
+
Noncash
Assets = Liabilities +
Gibbs
(3/6)
+
Hill
(2/6)
+
Manson
(1/6)
$ 11,000
$ 85,000
$ 30,000
$ 24,000
$ 28,000
$ 14,000
+ 61,000
$ 72,000
– 30,000
– 85,000
$
0
—
—
$ 30,000
– 30,000
– 12,000
$ 12,000
—
– 8,000
$ 20,000
—
– 4,000
$ 10,000
—
$ 42,000
– 42,000
$
0
$
0
$
0
$
$ 12,000
– 12,000
$
0
$ 20,000
– 20,000
$
0
$ 10,000
– 10,000
$
0
—
$
0
—
0
Ex. 13–25
a.
CITY SIGNS, LLC
Statement of LLC Liquidation
For the Period March 1–31, 2006
Member Equity
Cash
Noncash
+ Assets = Liabilities +
14
Ellis
(2/5)
+
Roane
(2/5)
+
Clausen
(1/5)
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment of
liabilities ........................................
Distribution of cash to members ....
Final balances ..................................
$
4,000
$125,000
$ 44,000
$ 28,000
$ 45,000
$ 12,000
+ 96,000
$100,000
– 44,000
–125,000
$
0
—
—
$ 44,000
– 44,000
– 11,600
$ 16,400
—
– 11,600
$ 33,400
—
–
$
5,800
6,200
—
$ 56,000
– 56,000
$
0
$
$
$ 16,400
– 16,400
$
0
$ 33,400
– 33,400
$
0
$
–
$
6,200
6,200
0
0
—
$
0
—
0
$
0
b.
Ellis, Member Equity ......................................................
Roane, Member Equity ..................................................
Clausen, Member Equity ...............................................
Cash ...........................................................................
15
16,400
33,400
6,200
56,000
PROBLEMS
Prob. 13–6A
1.
IMHOFF, BAXTER, AND WISE
Statement of Partnership Liquidation
For Period May 3–29, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of gain ...........................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Distribution of cash to partners ......
Final balances ..................................
Noncash
+ Assets = Liabilities +
Imhoff
(1/5)
+
Baxter
(2/5)
+
Wise
(2/5)
$ 10,000
$ 285,000
$ 55,000
$ 30,000
$ 90,000
$ 120,000
+ 345,000
$ 355,000
– 55,000
– 285,000
$
0
—
—
$ 55,000
– 55,000
+ 12,000
$ 42,000
—
+ 24,000
$ 114,000
—
+ 24,000
$ 144,000
—
$ 300,000
– 300,000
$
0
$
0
$
0
$
$ 42,000
– 42,000
$
0
$ 114,000
– 114,000
$
0
$ 144,000
– 144,000
$
0
—
$
16
0
—
0
Prob. 13–6A
Continued
2.
IMHOFF, BAXTER, AND WISE
Statement of Partnership Liquidation
For Period May 3–29, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Distribution of cash to partners ......
Final balances ..................................
+
Noncash
Assets = Liabilities +
Imhoff
(1/5)
+
Baxter
(2/5)
+
Wise
(2/5)
$ 10,000
$ 285,000
$ 55,000
$ 30,000
$ 90,000
$ 120,000
+ 175,000
$ 185,000
– 55,000
– 285,000
$
0
—
—
$ 55,000
– 55,000
– 22,000
$ 8,000
—
– 44,000
$ 46,000
—
– 44,000
$ 76,000
—
$ 130,000
– 130,000
$
0
$
$
$
–
$
$ 46,000
– 46,000
$
0
$ 76,000
– 76,000
$
0
0
—
$
0
17
0
—
$
0
8,000
8,000
0
Prob. 13–6A
Concluded
3.
IMHOFF, BAXTER, AND WISE
Statement of Partnership Liquidation
For Period May 3–29, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Receipt of deficiency .......................
Balances ...........................................
Distribution of cash to partners ......
Final balances ..................................
Noncash
+ Assets = Liabilities +
Imhoff
(1/5)
+
Baxter
(2/5)
+
Wise
(2/5)
$ 10,000
$ 285,000
$ 55,000
$ 30,000
$ 90,000
$ 120,000
+ 105,000
$ 115,000
– 55,000
– 285,000
$
0
—
—
$ 55,000
– 55,000
– 36,000
– 72,000
$ 6,000 (Dr.) $ 18,000
—
—
– 72,000
$ 48,000
—
$ 60,000
+ 6,000
$ 66,000
– 66,000
$
0
$
0
$
0
$
0
$
+
$
0
$
0
$
$ 48,000
—
$ 48,000
– 48,000
$
0
—
$
—
—
$
18
0
—
6,000 (Dr.)
6,000
0
—
0
$ 18,000
—
$ 18,000
– 18,000
$
0
Prob. 13–1B
1.
May
1
1
Cash .....................................................................
Merchandise Inventory .......................................
Crystal Hall, Capital .......................................
10,500
36,500
Cash .....................................................................
Accounts Receivable ..........................................
Equipment ...........................................................
Allowance for Doubtful Accounts ................
Accounts Payable..........................................
Notes Payable ................................................
Doug Tucker, Capital.....................................
12,000
18,000
40,000
47,000
1,000
14,000
15,000
40,000
2.
HALL AND TUCKER
Balance Sheet
May 1, 2005
Assets
Current assets:
Cash ....................................................................
Accounts receivable ..........................................
Less allowance for doubtful accounts .............
Merchandise inventory ......................................
Total current assets .....................................
Plant assets:
Equipment ..........................................................
Total assets .............................................................
Liabilities
Current liabilities:
Accounts payable ..............................................
Notes payable.....................................................
Total liabilities .........................................................
Partners’ Equity
Crystal Hall, capital .................................................
Doug Tucker, capital ...............................................
Total partners’ equity ..............................................
Total liabilities and partners’ equity ......................
19
$ 22,500
$ 18,000
1,000
17,000
36,500
$ 76,000
40,000
$ 116,000
$ 14,000
15,000
$ 29,000
$ 47,000
40,000
87,000
$ 116,000
Prob. 13–1B
Concluded
3.
Apr. 30
30
Income Summary ................................................
Crystal Hall, Capital .......................................
Doug Tucker, Capital.....................................
72,700
Crystal Hall, Capital ............................................
Doug Tucker, Capital ..........................................
Crystal Hall, Drawing.....................................
Doug Tucker, Drawing ..................................
20,000
26,000
35,200*
37,500*
20,000
26,000
*Computations:
Hall
Interest allowance ..............................................
Salary allowance ................................................
Remaining income (1:1) ....................................
Net income .........................................................
$
4,700
18,000
12,500
$ 35,200
Tucker
$
4,000
21,000
12,500
$ 37,500
Total
$
8,700
39,000
25,000
$ 72,700
Prob. 13–2B
(1)
$90,000
Plan
a.
b.
c.
d.
e.
f.
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
(2)
$240,000
Garland
Driscoe
Garland
Driscoe
$45,000
60,000
30,000
51,000
36,000
36,000
$45,000
30,000
60,000
39,000
54,000
54,000
$120,000
160,000
80,000
126,000
111,000
96,000
$120,000
80,000
160,000
114,000
129,000
144,000
Details
$90,000
Garland
$240,000
Driscoe
Garland
Driscoe
a.
Net income (1:1) ........................ $ 45,000
$ 45,000
$ 120,000
$ 120,000
b.
Net income (2:1) ........................ $ 60,000
$ 30,000
$ 160,000
$ 80,000
c.
Net income (1:2) ........................ $ 30,000
$ 60,000
$ 80,000
$ 160,000
d.
Interest allowance ..................... $ 24,000
Remaining allowance (1:1) .......
27,000
$ 12,000
27,000
$ 24,000
102,000
$ 12,000
102,000
20
e.
f.
Net income ................................. $ 51,000
$ 39,000
$ 126,000
$ 114,000
Interest allowance ..................... $ 24,000
Salary allowance .......................
30,000
Excess of allowances over
income (1:1) ...........................
(18,000)
Remaining income (1:1) ............
Net income ................................. $ 36,000
$ 12,000
60,000
$ 24,000
30,000
$ 12,000
60,000
$ 54,000
57,000
$ 111,000
57,000
$ 129,000
Interest allowance ..................... $ 24,000
Salary allowance .......................
30,000
Bonus allowance .......................
Excess of allowances over
income (1:1) ...........................
(18,000)
Remaining income (1:1) ............
Net income ................................. $ 36,000
$ 12,000
60,000
$ 24,000
30,000
$ 12,000
60,000
30,000
42,000
$ 96,000
42,000
$ 144,000
(18,000)
(18,000)
$ 54,000
Prob. 13–3B
1.
DIXON AND FAWLER
Income Statement
For the Year Ended December 31, 2006
Professional fees..................................................................
Operating expenses:
Salary expense ..............................................................
Depreciation expense—building ..................................
Property tax expense ....................................................
Heating and lighting expense ......................................
Supplies expense ..........................................................
Depreciation expense—office equipment ...................
Miscellaneous expense ................................................
Total operating expenses .........................................
Net income ............................................................................
Peter
Dixon
Division of net income:
Salary allowance ........................................
Interest allowance ......................................
Remaining income .....................................
Net income .......................................................
*$75,000  12%
**($55,000 – $5,000)  12%
21
$ 30,000
9,000*
41,000
$ 80,000
$285,650
$80,500
10,500
8,000
7,900
2,850
2,800
6,100
118,650
$167,000
May
Fawler
Total
$ 40,000 $ 70,000
6,000**
15,000
41,000
82,000
$ 87,000 $ 167,000
2.
DIXON AND FAWLER
Statement of Partners’ Equity
For the Year Ended December 31, 2006
Capital, January 1, 2006..................................
Additional investment during the year ..........
Net income for the year ..................................
Withdrawals during the year ..........................
Capital, December 31, 2006 ............................
Prob. 13–3B
Peter
Dixon
May
Fawler
Total
$ 75,000
—
$ 75,000
80,000
$ 155,000
60,000
$ 95,000
$ 50,000
5,000
$ 55,000
87,000
$ 142,000
75,000
$ 67,000
$ 125,000
5,000
$ 130,000
167,000
$ 297,000
135,000
$ 162,000
Concluded
3.
DIXON AND FAWLER
Balance Sheet
December 31, 2006
Assets
Current assets:
Cash ............................................................
Accounts receivable ..................................
Supplies ......................................................
Total current assets .............................
Plant assets:
Land ............................................................
Building ......................................................
Less accumulated depreciation ..........
Office equipment........................................
Less accumulated depreciation ..........
Total plant assets ............................
Total assets .....................................................
$ 22,000
38,900
1,900
$ 62,800
$ 25,000
$ 130,000
69,200
60,800
$ 39,000
21,500
17,500
Liabilities
Current liabilities:
Accounts payable ......................................
Salaries payable .........................................
Total liabilities .................................................
Partners’ Equity
22
103,300
$ 166,100
$
2,100
2,000
$
4,100
Peter Dixon, capital .........................................
May Fawler, capital..........................................
Total partners’ equity ......................................
Total liabilities and partners’ equity ..............
$ 95,000
67,000
162,000
$ 166,100
Prob. 13–4B
1. Apr. 30 Asset Revaluations .........................................
Accounts Receivable ................................
Allowance for Doubtful Accounts ............
*[($22,500 – $1,900)  5%] – $550
2,380
30 Merchandise Inventory ...................................
Asset Revaluations ...................................
2,500
30 Accumulated Depreciation—Equipment.......
Equipment ..................................................
Asset Revaluations ...................................
65,000
30 Asset Revaluations .........................................
Tom Denney, Capital .................................
Cheryl Burks, Capital ................................
20,120
1 Cheryl Burks, Capital......................................
Sara Wold, Capital .....................................
20,000
1 Cash .................................................................
Sara Wold, Capital .....................................
20,000
2. May
Prob. 13–4B
1,900
480*
2,500
45,000
20,000
10,060
10,060
20,000
20,000
Concluded
3.
DENNEY, BURKS, AND WOLD
Balance Sheet
May 1, 2006
Assets
Current assets:
Cash ............................................................
Accounts receivable ..................................
$ 20,600
Less allowance for doubtful accounts .....
1,030
Merchandise inventory ..............................
Prepaid insurance ......................................
Total current assets .............................
Plant assets:
23
$ 27,900
19,570
53,100
1,650
$ 102,220
Equipment ..................................................
Total assets .....................................................
Liabilities
Current liabilities:
Accounts payable ......................................
Notes payable.............................................
Total liabilities .................................................
100,000
$ 202,220
$ 12,100
10,000
$ 22,100
Partners’ Equity
Tom Denney, capital .......................................
Cheryl Burks, capital.......................................
Sara Wold, capital ...........................................
Total partners’ equity ......................................
Total liabilities and partners’ equity ..............
24
$ 90,060
50,060
40,000
180,120
$ 202,220
Prob. 13–5B
1.
BOOTH, OWEN, AND RAMARIZ
Statement of Partnership Liquidation
For Period May 3–29, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Receipt of deficiency .......................
Balances ...........................................
Payment of liabilities........................
Balances after payment of liabilities
Cash distributed to partners ...........
Final balances ..................................
2.
+
Noncash
Assets = Liabilities +
Booth
(50%)
Owen
(25%)
+
+
Ramariz
(25%)
$
1,900
$ 62,000
$ 30,000
$ 20,000
$
3,900
$ 10,000
+
$
+
$
–
$
–
$
26,000
27,900
5,100
33,000
30,000
3,000
3,000
0
– 62,000
$
0
—
$
0
—
$
0
—
$
0
—
$ 30,000
—
$ 30,000
– 30,000
$
0
—
$
0
– 18,000
$ 2,000
—
$ 2,000
—
$ 2,000
– 2,000
$
0
–
$
+
$
9,000
5,100 (Dr.)
5,100
0
—
0
—
0
–
$
$
$
$
$
–
$
9,000
1,000
—
1,000
—
1,000
1,000
0
The $5,100 deficiency of Owen would be divided between the other partners, Booth and Ramariz, in their incomesharing ratio (2:1 respectively). Therefore, Booth would absorb 2/3 of the $5,100 deficiency, or $3,400, and Ramariz
would absorb 1/3 of the $5,100 deficiency, or $1,700.
25
Prob. 13–6B
1.
EWING, JOHNSON, AND LANDRY
Statement of Partnership Liquidation
For Period October 1–30, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of gain ...........................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Distribution of cash to partners ......
Final balances ..................................
Prob. 13–6B
Noncash
+ Assets = Liabilities +
Ewing
(2/5)
Johnson
+
(2/5)
Landry
+
(1/5)
$ 20,000
$ 250,000
$ 50,000
$ 100,000
$ 90,000
$ 30,000
+ 330,000
$ 350,000
– 50,000
– 250,000
$
0
—
—
$ 50,000
– 50,000
+ 32,000
$ 132,000
—
+ 32,000
$ 122,000
—
+ 16,000
$ 46,000
—
$ 300,000
– 300,000
$
0
$
0
$
0
$
$ 132,000
– 132,000
$
0
$ 122,000
– 122,000
$
0
$ 46,000
– 46,000
$
0
—
$
0
—
0
Continued
2.
EWING, JOHNSON, AND LANDRY
Statement of Partnership Liquidation
For Period October 1–30, 2006
Capital
Cash
Noncash
+ Assets = Liabilities +
26
Ewing
(2/5)
Johnson
+
(2/5)
Landry
+
(1/5)
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Distribution of cash to partners ......
Final balances ..................................
Prob. 13–6B
$ 20,000
$ 250,000
$ 50,000
$ 100,000
$ 90,000
$ 30,000
+ 120,000
$ 140,000
– 50,000
– 250,000
$
0
—
—
$ 50,000
– 50,000
–
$
52,000
48,000
—
– 52,000
$ 38,000
—
– 26,000
$ 4,000
—
$ 90,000
– 90,000
$
0
$
$
$
–
$
48,000
48,000
0
$ 38,000
– 38,000
$
0
$
–
$
0
—
$
0
—
0
$
0
4,000
4,000
0
Concluded
3.
EWING, JOHNSON, AND LANDRY
Statement of Partnership Liquidation
For Period October 1–30, 2006
Capital
Cash
Balances before realization .............
Sale of assets and division
of loss............................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Receipt of deficiency .......................
Balances ...........................................
Distribution of cash to partners ......
Final balances ..................................
Noncash
+ Assets = Liabilities +
Ewing
(2/5)
Johnson
+
(2/5)
Landry
+
(1/5)
$ 20,000
$ 250,000
$ 50,000
$ 100,000
$ 90,000
$ 30,000
+ 50,000
$ 70,000
– 50,000
– 250,000
$
0
—
—
$ 50,000
– 50,000
– 80,000
$ 20,000
—
– 80,000
$ 10,000
—
– 40,000
$ 10,000 (Dr.)
—
$
+
$
–
$
$
$
$ 20,000
—
$ 20,000
– 20,000
$
0
$ 10,000
—
$ 10,000
– 10,000
$
0
$ 10,000 (Dr.)
+ 10,000
$
0
—
$
0
20,000
10,000
30,000
30,000
0
0
—
$
0
$
0
$
—
$
27
0
—
0
—
0