Supplemental Instruction Handouts
Financial Accounting
Review of Chapters 9, 10, 11, 12 and Appendix A
Answer Key
1. On December 31, 2011, at the end of the current accounting period for Apex Company,
the allowance for doubtful accounts had a credit balance of $750. On the following March
18, 2012, management decided the $490 account of M. Peters was uncollectible and
wrote it off as a bad debt using the allowance method. About three months later, on June
20, 2012, Peters unexpectedly paid the amount previously written off. On December 31,
2012, Apex Company made their yearend adjustment to the allowance account by
calculating 5% of all sales. The company’s sales were $55,000 for the year.
Required:
A. Prepare the necessary general journal entries for March 18, June 20 and December 31,
2012.
Date
Mar 18
June 20
June 20
Dec 31
General Journal
Account Titles and Explanations
Allowance for Doubtful Accounts
Accounts Receivable – M. Peters
PR
Debit
490
Page ____
Credit
490
Accounts Receivable – M. Peters
Allowance for Doubtful Accounts
490
Cash
Accounts Receivable – M. Peters
490
Bad Debts Expense
Allowance for Doubtful Accounts
2,750
490
490
2,750
B. Calculate the ending balance in the allowance for doubtful accounts for December 31,
2012.
$750 – $490 + $490 + $2,750 = $3,500
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
2. At the end of each year, Store Ur Stuff Self Storage Company uses their ending balance
in accounts receivable to estimate their bad debts for the coming year. On December 31,
2011, the company’s year end, it has outstanding accounts receivable of $65,000 and
estimates that 6% will be uncollectible.
Required:
Prepare the necessary general journal entry to record bad debts expense for 2011 under
each of the following unrelated assumptions:
A. There is a $967 credit balance in the allowance account before the adjustment.
Date
Dec 31
General Journal
Account Titles and Explanations
Bad Debts Expense
Allowance for Doubtful Accounts
($65,000 x 0.06 = $3,900 – $967 = $2,933)
PR
Debit
2,933
Page ____
Credit
2,933
B. There is a $1,584 debit balance in the allowance account before the adjustment.
Date
Dec 31
General Journal
Account Titles and Explanations
Bad Debts Expense
Allowance for Doubtful Accounts
($65,000 x 0.06 = $3,900 + $1,584 = $5,484)
PR
Debit
5,484
Page ____
Credit
5,484
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
3. The Bettis Company had the following transactions involving notes receivable:
2011:
November 1 Accepted a $4,500, five month, 7% note dated today from S. Smith in
granting a time extension on his past due account.
December 31 Made an adjusting entry to record the accrued interest on the S. Smith note.
2012:
January 25 Accepted a $2,300, 90 day, 5% note dated today from L. Saunders in granting a
time extension on her past due account.
April 1 S. Smith dishonored his note when presented for payment.
April 24 L. Saunders honored her note when presented for payment.
December 31 After exhausting all legal means of collection, wrote off S. Smith’s account
using the allowance method.
Required:
Prepare general journal entries for each transaction described above.
Date
2011
Nov 1
Dec 31
2012
Jan 25
April 1
April 24
Dec 31
General Journal
Account Titles and Explanations
PR
Debit
Notes Receivable
Accounts Receivable – S. Smith
4,500
Interest Receivable
Interest Revenue (4,500 x 0.07 x 2/12)
52.50
Notes Receivable
Accounts Receivable – L. Saunders
2,300
Page ____
Credit
4,500
52.50
2,300
Accounts Receivable – S. Smith
Interest Receivable
Notes Receivable
Interest Revenue (4,500 x 0.07 x 3/12)
4,631.25
Cash
Notes Receivable
Interest Revenue (2,300 x 0.05 x 90/365)
2,328.36
Allowance for Doubtful Accounts
Accounts Receivable – S. Smith
4,631.25
52.50
4,500
78.75
2,300
28.36
4,631.25
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
4. The accountant for your company has prepared a schedule of the December 31, 2011,
accounts receivable by age and, on the basis of past experience, has estimated the
percentage of the receivables in each age category that will become uncollectible. This
information is summarized in the following table:
December 31, 2011
Accounts Receivable
$112,500
$48,500
$23,650
$12,750
$4,300
Age of
Accounts Receivable
Not Due (under 30 days)
1 to 30 days past due
31 to 60 days past due
61 to 90 days past due
Over 90 days past due
Expected Percentage
Uncollectible
3%
6%
12%
36%
75%
Required:
Prepare the necessary year end adjusting entry based on the following independent
assumptions:
A. The allowance account has a credit balance of $4,350.
Date
Dec 31
General Journal
Account Titles and Explanations
Bad Debts Expense
Allowance for Doubtful Accounts
PR
Debit
12,588
Page ____
Credit
12,588
($112,500 x 0.03) + ($48,500 x 0.06) + ($23,650 x 0.12) + ($12,750 x 0.36) + ($4,300 x 0.75)
= $3,375 + $2,910 + $2,838 + $4,590 + $3,225 = $16,938 – $4,350 = $12,588
B. The allowance account has a debit balance of $2,250.
Date
Dec 31
General Journal
Account Titles and Explanations
Bad Debts Expense
Allowance for Doubtful Accounts
PR
Debit
19,188
Page ____
Credit
19,188
$16,938 + $2,250 = $19,188
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
5. On January 14, at the end of the first pay period of the year, a company’s Payroll
Register showed that its employees had earned $25,000 of sales salaries and $14,250 of
office salaries. Withholdings from the employees’ salaries were to include $679 of EI,
$1,943 of CPP, $7,850 of income taxes, $1,500 of hospital insurance, and $650 of union
dues.
Required:
A. Prepare the journal entry to record the January 14 payroll.
Date
Jan 14
General Journal
Account Titles and Explanations
Sales Salaries Expense
Office Salaries Expense
EI Payable
CPP Payable
Income Tax Payable
Hospital Insurance Payable
Union Dues Payable
Salaries Payable
PR
Debit
25,000
14,250
Page ____
Credit
679
1,943
7,850
1,500
650
26,628
B. Prepare a journal entry to record the employer’s payroll expenses resulting from the
January 14 payroll.
Date
Jan 14
General Journal
Account Titles and Explanations
EI Expense
CPP Expense
EI Payable (679 x 1.4)
CPP Payable
PR
Debit
950.60
1,943
Page ____
Credit
950.60
1,943
C. Prepare the journal entry the employer would make to pay the payroll deductions to
the government on January 28.
Date
Jan 28
General Journal
Account Titles and Explanations
EI Payable (679 + 950.60)
CPP Payable (1943 + 1943)
Income Tax Payable
Cash
PR
Debit
1,629.60
3,886
7,850
Page ____
Credit
13,365.60
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
6. The following information as to earnings and deductions for the pay period ended May
20 was taken from a company’s payroll records:
Employee
Weekly
Gross
Pay
M. Cullen
J. Hanson
A. Lee
M. Mann
Totals
$ 840
$ 920
$ 760
$1,200
$3,720
Earnings
to End
of
Previous
Week
$16,800
$18,400
$15,200
$24,000
Income Health
A. EI
Taxes
Insurance (Gross
Deductions Pay x
0.0173)
$168
$24
$14.53
$184
$24
$15.92
$152
$36
$13.15
$240
$24
$20.76
$744
$108
$64.36
A. CPP
(3,500/52)
(Gross Pay
– 67.31) x
0.0495
B. Net
Pay
$38.25
$42.21
$34.29
$56.07
$170.82
$595.22
$653.87
$524.56
$859.17
$2,632.82
Required:
A. In the chart above calculate the employees’ EI and CPP withholdings.
B. In the chart above calculate each employees net pay.
C. Prepare a general journal entry to record the payroll assuming all employees work in
the office.
Date
May 20
General Journal
Account Titles and Explanations
Office Salaries Expense
Income Tax Payable
Hospital Insurance Payable
EI Payable
CPP Payable
Salaries Payable
PR
Debit
3,720
Page ____
Credit
744
108
64.36
170.82
2,632.82
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
7. On January 3, 2011, your company purchased a machine for $23,000 with terms of
2/10, n/60, FOB shipping point. The seller prepaid the shipping charges, $520, adding this
amount to the invoice. The machine required a special steel mounting plate and a new
power connection at a cost of $2,940. Assemble of the machine cost $750 to get it into
operation. While the machine was being moved onto the steel mounting plate it was
dropped and damaged. The cost of repairs was $380 to get it working properly. Later,
$100 of raw materials was consumed in adjusting the machine so that it would produce a
satisfactory product. The adjustments were normal for this type of machine and were not
the result of the damage. However, the items produced while the adjustments were
being made were not sellable. The company always pays within the discount period.
Required:
A. Prepare a calculation to show the cost of this machine.
$23,000 x (1 – 0.02) = $22,540 + $520 + $2,940 + $750 + $100 = $26,850
B. Prepare the general journal entry for the purchase of the machine, assuming the
company paid cash for the machine.
General Journal
Date
Jan 3
Account Titles and Explanations
Page ____
PR
Machine
Debit
Credit
26,850
Cash
26,850
C. Calculate the depreciation for the machine for 2012 using the double – declining
balance method. Your company believes this machine will have a useful life of 3 years and
a salvage value of $500.
2011
$26,850 x 2/3 = $17,900
2012
($26,850 – $17,900) x 2/3 = $5,966.67
D. Prepare the adjusting journal entry for the end of the year, December 31, 2012.
General Journal
Date
Account Titles and Explanations
Dec 31
Depreciation Expense – Machine
Accumulated Depreciation – Machine
Page ____
PR
Debit
Credit
5,966.67
5,966.67
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
E. Calculate the machines book value for the end of 2012.
2012
$26,850 – $17,900 – $5,966.67 = $2,983.33
8. On March 20, 2011, Piper Plumbing Company paid $184,125 for real estate plus $9,800
in closing costs. The real estate included land appraised at $83,160; land improvements
appraised at $27,720 and a building appraised at $87,120.
Required:
A. Prepare a calculation showing the allocation of the total cost amongst the three items
purchased.
184,125 + 9,800 = 193,925 Total Paid
Land
$83,160/$198,000 = 0.42 x $193,925 =
Land Improvements $27,720/$198,000 = 0.14 x $193,925 =
Building
+$87,120/$198,000 = 0.44 x $193,925 =
Total
$198,000
$81,448.50
$27,149.50
$85,327. 00
$193,925.00
B. Prepare a general journal entry to record the purchase assuming Piper Plumbing
Company paid cash.
Date
Mar 20
General Journal
Account Titles and Explanations
Land
Land Improvements
Building
Cash
PR
Debit
81,448.50
27,149.50
85,327.00
Page ____
Credit
193,925
C. Calculate the depreciation for the building for 2011 using the straight – line method to
the nearest month. Piper Plumbing Company feels that the building can be used for 15
years with a $5,000 salvage value.
($85,327 – $5,000) / 15 = $5355.13 x 9/12 = $4,016.35
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
D. Prepare the adjusting journal entry for the end of the year, December 31, 2011.
Date
Dec 31
General Journal
Account Titles and Explanations
Depreciation Expense – Building
Accumulated Depreciation – Building
PR
Debit
4,016.35
Page ____
Credit
4,016.35
9. After planning to build a new manufacturing plant, Jammers Casual Wear purchased a
lot on which a small building was located. The negotiated purchase price for this real
estate was $150,000 for the lot plus $80,000 for the building. The company paid $23,000
to have the old building torn down and $34,000 for landscaping the lot. Finally, it paid
$960,000 in construction costs, which included the cost of a new building plus $57,000 for
lighting and paving a parking lot next to the building.
Required:
A. Calculate the value of the land, land improvements and the building.
Land
$150,000
$80,000
$23,000
$34,000
$287,000
Land Improvements
$57,000
Building
$960,000
-$57,000
$903,000
B. Present a single general journal entry to record the costs incurred by Jammers, all of
which were paid in cash, on April 15, 2011.
Date
April 15
General Journal
Account Titles and Explanations
Land
Land Improvements
Building
Cash
PR
Debit
287,000
57,000
903,000
Page ____
Credit
1,247,000
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
10. Moon Paper Company installed a computerized machine in its factory at a cost
$84,600 on March 3, 2011. The machine has a useful life of 5 years or 700,000 units with
a salvage value of $14,600. Moon Paper Company’s year end is December 31.
Year Units Produced
2011
75,000
2012
180,000
2013
135,000
2014
190,000
2015
150,000
Required:
Using the space provided:
A. Calculate the depreciation expense for each year of the machine’s life using the units –
of – production method.
($84,600 – $14,600) / 700,000 = $0.10/unit
2011 – 75,000 x $0.10 = $7,500
2012 – 180,000 x $0.10 = $18,000
2013 – 135,000 x $0.10 = $13,500
2014 – 190,000 x $0.10 = $19,000
2015 – (700,000 – 75,000 – 180,000 – 135,000 – 190,000) x $0.10 = $12,000
B. Calculate the depreciation expense for each year of the machine’s life using the double
– declining balance method.
2011 – $84,600 x 2/5 = $33,840 x 10/12 = $28,200
2012 – $84,600 – $28,200 = $56,400 x 2/5 = $22,560
2013 – $84,600 – $28,200 – $22,560 = $33,840 x 2/5 = $13,536
2014 – $84,600 – $28,200 – $22,560 – $13,536 = $20,304 – $14,600 = $5,704
2015 – $0
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
11. On April 4th, 2010, Lake Excavating Services purchased a trencher for $500,000. The
machine was expected to have a five year life and a salvage value of $50,000. In early
January of 2012, it was decided that the machine would last a total of 7 years and have a
new salvage value of $14,375. This company uses the straight – line method of
depreciating to the nearest month.
Required:
A. Calculate the depreciation for the trencher for 2010.
($500,000 – $50,000) / 5 = $90,000 x 9/12 = $67,500
B. Calculate the book value for the trencher at the end of 2011.
2011
$500,000 – $67,500 – $90,000 = $342,500
C. Show how the machine would appear on the 2011 balance sheet.
Property, Plant and Equipment
Trencher
Less: Accumulated Depreciation – Trencher
Net Trencher
$500,000
157,500
$342,500
D. Calculate the depreciation for the trencher for 2012.
2012
($342,500 – $14,375) / (7 – 1.75) = $328,125 / 5.25 = $62,500
E. Present the general journal entry for the depreciation at the end of 2012.
Date
Dec 31
General Journal
Account Titles and Explanations
Depreciation Expense – Trencher
Accumulated Depreciation – Trencher
PR
Debit
62,500
Page ____
Credit
62,500
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
12. Plum Hill Industries purchased and installed a machine on January 3, 2008, at a total
cost of $185,500. Straight line depreciation was taken each year for four years, based on
the assumption of a seven year life and no salvage value. The machine was disposed of on
July 2, 2012, during its fifth year of operation.
Required:
Prepare a general journal entry for each of the following unrelated assumptions:
A. The machine is sold for $70,000 cash.
Date
July 2
General Journal
Account Titles and Explanations
Cash
Accumulated Depreciation – Machine
Gain on disposal
Machine
($185,500 / 7 = $26,500 x 4.5 years = $119,250)
PR
Debit
70,000
119,250
Page ____
Credit
3,750
185,500
B. The machine is destroyed in a fire and Plum Hill receives an insurance settlement of
$60,000.
Date
July 2
General Journal
Account Titles and Explanations
Cash
Accumulated Depreciation – Machine
Loss on disposal
Machine
PR
Debit
60,000
119,250
6,250
Page ____
Credit
185,500
C. The machine and $100,000 cash were traded for a new machine of like purpose that
had a fair value of $187,000.
Date
July 2
General Journal
Account Titles and Explanations
Machine
Accumulate Depreciation – Machine
Gain on exchange
Machine
Cash
PR
Debit
187,000
119,250
Page ____
Credit
20,750
185,500
100,000
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
13. On December 31, 2011, RH Company’s year – end, RH Company is doing their annual
year end reevaluation of its property, plant and equipment assets to see if any of their
assets has incurred an impairment loss.
Asset:
Cost
Building
Equipment
Land
Truck
$450,000
$95,000
$125,000
$122,000
Estimated
Useful Life
10
8
N/A
6
Salvage
Value
$50,000
$5,000
N/A
$2,000
Total Accumulated
Depreciation
$180,000
$45,000
N/A
$80,000
Replacement
Value
$240,000
$55,000
$145,000
$42,000
Required:
A. Calculate the book value of each asset listed above.
Building: $450,000 – $180,000 = $270,000
Equipment: $95,000 – $45,000 = $50,000
Land: $125,000 – $0 = $125,000
Truck: $122,000 – $80,000 = $42,000
B. Calculate impairment loss for each asset that has a book value less than replacement
value.
Building: $270,000 – $240,000 = $30,000
C. Prepare a general journal for December 31, 2011 to record impairment loss.
Date
Dec 31
General Journal
Account Titles and Explanations
Impairment Loss
Building
PR
Debit
30,000
Page ____
Credit
30,000
D. Recalculate the depreciation expense for any asset that has incurred an impairment
loss. (All assets are depreciated using the straight – line method of amortization.)
($450,000 - $50,000) / 10 = $40,000 Depreciation per year
$180,000 / $40,000 = 4.5 years
($240,000 – $50,000) / 10 – 4.5 = $190,000 / 5.5 = $34,545.45
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
14. Newberg and Scampi began a partnership by investing $52,000 and $78,000,
respectively. During its first year, the partnership earned a net income of $180,000. The
partnership has a year end of December 31.
Required:
In the space provided, prepare calculations that show how the income should be allocated
to the partners under each of the following plans for sharing incomes and losses:
A. The partners failed to agree on a method of sharing income.
180,000/2 = 90,000
B. The partners agreed to share incomes and losses in their investment ratio.
Newton
Scampi
Total
$52,000 ÷ $130,000 = 0.4 x $180,000 = $72,000
$78,000 ÷ $130,000 = 0.6 x $180,000 = $108,000
$130,000
C. The partners agreed to share income by allowing an $85,000 per year salary allowance
to Newberg, $65,000 per year salary allowance to Scampi, 10% interest on beginning
capital balances, and the remainder equally.
Newberg
Scampi
Salary
Interest
$52,000 x 0.10
$78,000 x 0.10
85,000
65,000
$17,000/2
8,500
98,700
5,200
7,800
8,500
81,300
Total
180,000
150,000
5,200
7,800
17,000
17,000
0
D. Prepare the year end closing journal entry based on your answer in part C.
Date
Dec 31
General Journal
Account Titles and Explanations
Income Summary
Newberg, Capital
Scampi, Capital
PR
Debit
180,000
Page ____
Credit
98,700
81,300
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
15. The Harris – Bartlett Partnership has total partners’ equity of $380,000, which is made
up of Harris, Capital, $300,000, and Bartlett, Capital, $80,000. The partners share net
income and losses in a ratio of 3:1. On July 1, Megan is admitted to the partnership and
given a 20% interest in equity and in gains and losses.
Required:
Prepare the journal entry to record the entry of Megan under each of the following
unrelated assumptions: Megan invests cash of:
A. $95,000
Date
July 1
General Journal
Account Titles and Explanations
Cash
Megan, Capital
PR
Debit
95,000
Page ____
Credit
95,000
($380,000 + $95,000 = $475,000 x 0.2 = $95,000)
B. $115,000
Date
July 1
General Journal
Account Titles and Explanations
Cash
Megan, Capital
Harris, Capital ($16,000 x ¾)
Bartlett, Capital ($16,000 x ¼)
PR
Debit
115,000
Page ____
Credit
99,000
12,000
4,000
($380,000 + $115,000 = $495,000 x 0.2 = $99,000
$115,000 – $99,000 = $16,000)
C. $55,000
Date
July 1
General Journal
Account Titles and Explanations
Cash
Harris, Capital ($32,000 x ¾)
Bartlett, Capital ($32,000 x ¼)
Megan, Capital
PR
Debit
55,000
24,000
8,000
Page ____
Credit
87,000
($380,000 + $55,000 = $435,000 x 0.2 = $87,000
$55,000 – $87,000 = -$32,000)
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
16. Hollis, Evans, and Bowen have been partners sharing net incomes and losses in a 3:2:5
ratio. On October 31, 2011, the date Bowen retires from the partnership, the equities of
the partners are Hollis $130,000; Evans, $200,000; and Bowen $50,000.
Required:
Present general journal entries to record Bowen’s retirement under each of the following
unrelated assumption:
A. Bowen is paid $50,000.
Date
Oct 31
General Journal
Account Titles and Explanations
Bowen, Capital
Cash
PR
Debit
50,000
Page ____
Credit
50,000
B. Bowen is paid $60,000.
Date
Oct 31
General Journal
Account Titles and Explanations
Bowen, Capital
Hollis, Capital ($10,000 x 3/5)
Evans, Capital ($10,000 x 2/5)
Cash
($50,000 – $60,000 = -$10,000)
PR
Debit
50,000
6,000
4,000
Page ____
Credit
60,000
C. Bowen is paid $45,000.
Date
Oct 31
General Journal
Account Titles and Explanations
Bowen, Capital
Hollis, Capital ($5,000 x 3/5)
Evans, Capital ($5,000 x 2/5)
Cash
($50,000 – $45,000 = $5,000)
PR
Debit
50,000
Page ____
Credit
3,000
2,000
45,000
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
17. Prince, Count, and Earl are partners who share incomes and losses in a ratio in a 1:3:4.
After lengthy disagreements among the partners and several unprofitable periods, the
partners decided to liquidate the partnership. Before the liquidation, the partnership
balance sheet showed:
Assets:
Liabilities:
Cash
$62,000
Accounts Payable
$50,000
Machinery
500,000
Notes Payable
150,000
Less: Accumulated
Total Liabilities
$200,000
Depreciation – Machinery 324,000
Owner’s Equity:
Prince, Capital $8,000
Count, Capital 10,000
Earl, Capital 20,000
38,000
Total Assets
$238,000
Total Liabilities and
Owner’s Equity
$238,000
Required:
Prepare all the necessary general journal entries to liquidate the partnership if the assets
were sold for $180,000. The partnership was liquidated on December 31, 2011.
Date
Dec 31
Dec 31
Dec 31
Dec 31
General Journal
Account Titles and Explanations
Cash
Accumulated Depreciation – Machinery
Gain on disposal
Machinery
Gain on disposal
Prince, Capital ($4,000 x 1/8)
Count, Capital ($4,000 x 3/8)
Earl, Capital ($4,000 x 4/8)
Accounts Payable
Notes Payable
Cash
Prince, Capital ($8,000 + $500)
Count, Capital ($10,000 + $1,500)
Earl, Capital ($20,000 + $2,000)
Cash
PR
Debit
180,000
324,000
Page ____
Credit
4,000
500,000
4,000
500
1,500
2,000
50,000
150,000
200,000
8,500
11,500
22,000
42,000
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.
18. Prince, Count, and Earl are partners who share incomes and losses in a ratio in a 1:3:4.
After lengthy disagreements among the partners and several unprofitable periods, the
partners decided to liquidate the partnership. Before the liquidation, the partnership
balance sheet showed:
Assets:
Cash
$62,000
Machinery
500,000
Less: Accumulated
Depreciation – Machinery 324,000
Total Assets
$238,000
Liabilities:
Accounts Payable
Notes Payable
Total Liabilities
Owner’s Equity:
Prince, Capital $8,000
Count, Capital 10,000
Earl, Capital 20,000
Total Liabilities and
Owner’s Equity
$50,000
150,000
$200,000
38,000
$238,000
Required:
Prepare all the necessary general journal entries to liquidate the partnership if the assets
were sold for $168,000. The partnership was liquidated on December 31, 2011.
Date
Dec 31
Dec 31
Dec 31
Dec 31
General Journal
Account Titles and Explanations
Cash
Accumulated Depreciation – Machinery
Loss on disposal
Machinery
Prince, Capital ($8,000 x 1/8)
Count, Capital ($8,000 x 3/8)
Earl, Capital ($8,000 x 4/8)
Loss on disposal
Accounts Payable
Notes Payable
Cash
Prince, Capital ($8,000 – 1,000)
Count, Capital ($10,000 – 3,000)
Earl, Capital ($20,000 – 4,000)
Cash
PR
Debit
168,000
324,000
8,000
Page ____
Credit
500,000
1,000
3,000
4,000
8,000
50,000
150,000
200,000
7,000
7,000
16,000
30,000
Learning Assistance Centre
www.rrc.mb.ca/lac
These answers were created by Michael Reimer and corrected by Gerry Richards for the
Learning Assistance Centre.