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12 A-1

a.
General Journal 19__ July

1 Cash Inventory
Tina Barton, Capital

$40,000 56,000

To record Barton's Investment in the partnership 1 Cash Accounts Receivable Inventory Office Equipment Allowance for Doubtful Accounts Accounts Payable Sam Liu,Capital To record Liu's Investment in the partnership 21,400 89,600 12,800 9,000

b.

BARTON AND LIU BALANCE SHEET July 1, 19__

Assets Cash Accounts receivable Less: Allowance for doubtful accounts Inventory Office equipment TOTAL ASSETS Liabilities & Partner's Equity Liabilities: Accounts payable Partner's equity Tina Barton, capital Sam Liu, Capital TOTAL LIABILITIES & PARTNER'S EQUITY

$89,600 8,000

96,000 96,000

c.
General Journal 19__ June

30 Income Summary

78,000

Tina Barton, Capital

Sam Liu,Capital To close the Income Summary report 30 Tina Barton, Capital Sam Liu,Capital
Tina Barton, Drawing

32,000 32,000

Sam Liu,Drawing To close the partner's drawing accounts

12 A-1

$96,000

8,000 28,800 96,000

61,400 81,600 68,800 9,000 220,800

28,800

192,000 220,800

39,000 39,000

32,000 32,000

12A-2
a. B&G DISTRIBUTORS Income Statement For Current Year $ $ $ 112,380 91,620 $ Bolton Gorman $ $ 7,000 $ 20,500 $ 27,500 $ 20,500 26,500 $ 6,000 $ (13,000) 41,000 648,960 390,960 258,000

Sales Less: Cost of goods sold Gross profit on sales Operating expenses: Selling Administrative Net Income Division of net income: Net Income to be divided Interest on Invested capitals: Bolton ($70,000 x 0.10) Gorman ($60,000 x 0.10) Remaining net income to be dived equally Bolton Gorman Total share to each partner

20,400 54,000 Total 54,000

b.

B&G DISTRIBUTORS Statement of Partner's Capital For Current Year Bolton Gorman $ $ $ 60,000 26,500 86,500 7,200 79,300 $ $ $ Total 130,000 54,000 184,000 17,280 166,720

Balance, beginning of year Add: Net Income Subtotal Less: Drawings Balance, end of the year

$ $ $

70,000 27,500 97,500 10,080 87,420

b.

B&G DISTRIBUTORS Balance Sheet At End of Current Year Assets

Current assets: Cash Accounts receivable Inventory

32,620 81,000 28,200

Prepaid expenses Total current assets Plant and equipment: Equipment Less: accumulated depreciation Total plant and equipment Total assets Liabilities & Partners' Capital Current liabilities: Notes payable Accounts payable Accrued expenses Total current liabilities Partners' capital: Bolton, capital Gorman, capital Total partners' capital Total liabilities & partners' capital

$ $ 90,000 18,000 $

3,900 145,720

72,000 217,720

$ $ 87,420 79,300 $

9,600 38,520 2,880 51,000

166,720 217,720

12A-3
a. Distribution of Net Income Dunn (1) No mention of profit sharing Net Income to be divided Dunn (50%) Pascal (50%) Total share to each partner $ $ 22,500 $ 22,500 22,500 22,500 $ (45,000) 45,000 Pascal Net Income

(2) Interest on capitals, and fixed ratio Net Income to be divided Interest allownances on beginning capitals: Dunn ($40,000 x 15%) Pascal ($60,000 x 15%) Total allocated as interest allowances Remaining Income after interest allowances Allocated in a fixed ratio: Dunn (50%) Pascal (50%) Total share to each partner $ $ 6,000 $ 9,000 $ 15,000 $ 21,000 $ 15,000 24,000 $ (30,000) (15,000) 30,000 45,000

(3) Salaries, and balances in fixed ratio Net Income to be divided Salary allowances to partners Remaining Income after salary allowances Allocated in a fixed ratio: Dunn (50%) Pascal (50%) Total share to each partner $ $ 24,000 $ 20,000 $ 500 $ 24,500 $ 500 20,500 $ (1,000) 45,000 (44,000) 1,000

(4) Salaries, Interest and fixed ratio Net Income to be divided Salary allowances to partners Income after salary allowances Interest allowances on beginning capitals: Dunn ($40,000 x 15%) Pascal ($60,000 x 15%) Total allocated as interest allowances Residual loss after salary and interest allowances Allocated in a fixed ratio: Dunn (50%) Pascal (50%) $ $ 18,000 $ 26,000 $ 6,000 9,000 $ (7,000) (7,000) 14,000 (15,000) (14,000) 45,000 (44,000) 1,000

Total share to each partner

17,000

28,000

b.
General Journal

June

Journal entry to close Income Summary account


(case 4 from part a above)

Income Summary Dunn, Capital Pascal, Capital To close the Income Summary account by crediting each partner with his authorized salary and with interest on invested capital and by dividing the residual loss equally.

45,000 $ $ 17,000 28,000

12A-4
Distribution of Net Income Reed a. Net Income to be divided Salary allowances to partners Income after salary allowances Interest allownances on capitals: Reed($140,000 x 12%) Stein($100,000 x 12%) Trump($60,000 x 12%) Total allocated as interest allowances Remaining Income after salary and int allowances Allocated in a fixed ratio: Reed (50%) Stein (30%) Trump (20%) Total share to each partner Stein Trump Net Income $ 554,000 $ (98,000) $ 456,000

$ 60,000

$ 38,000

$ 16,800 $ 12,000 $ 7,200 $ (36,000) $ 420,000 $ 210,000 $ 126,000 $ 226,800 $ 198,000 $ 84,000 $ 129,200 $ (420,000) $ -

b.

Net Income to be divided Salary allowances to partners Loss after salary allowances Interest allownances on capitals: Reed($140,000 x 12%) Stein($100,000 x 12%) Trump($60,000 x 12%) Total allocated as interest allowances Remaining Loss after salary and int allowances Allocated in a fixed ratio: Reed (50%) Stein (30%) Trump (20%) Total share to each partner

$ 60,000

$ 38,000

$ $ $

83,000 (98,000) (15,000)

$ 16,800 $ 12,000 $ 7,200 $ $ $ (25,500) $ (15,300) $ (8,700) $ 56,700 $ (10,200) $ $ 35,000 $ 51,000 (36,000) (51,000)

c.

Loss to be divided Salary allowances to partners Loss after salary allowances Interest allownances on capitals: Reed($140,000 x 12%) Stein($100,000 x 12%) Trump($60,000 x 12%) Total allocated as interest allowances Remaining Loss after salary and int allowances Allocated in a fixed ratio: Reed (50%) Stein (30%) Trump (20%) Total share to each partner

$ 60,000

$ 38,000

$ (19,000) $ (98,000) $ (117,000)

$ 16,800 $ 12,000 $ 7,200 $ (36,000) $ (153,000) $ (76,500) $ (45,900) $ (59,700) $ 21,600 $ (30,600) $ 153,000 $ 14,600 $ -

12 A-5
General Journal

Kidd, Capital
Ritter, Capital

$ 120,000

To record purchase of one-half of kidd's interest by Ritter (1/2 of $240,000)

Svenson, Capital Kidd, Capital Kohl, Capital Ritter, Capital To record purchase by Ritter of one-quarter of the capital interestsof the existing partners. Net assets (owners' equity) of old partnership add: cash investment by Ritter Net assets (owners' equity) of new partnership Ritter's interest (1/4 of $920,000) Bonus to Ritter($230,000-$200,000 invested)

75,000 60,000 45,000

Cash Svenson, Capital($30,000 x 60%) Kidd, Capital($30,000 x 30%) Kohl, Capital($30,000 x 10%) Ritter, Capital To record Ritter's admission as a partner with a one-fourth interest in capital and profits upon investments of $200,000, and to reduce existing partners' capital accounts by proportionate share of nonus to incoming partner.

200,000 18,000 9,000 3,000

Net assets (owners' equity) of old partnership add: cash investment by Ritter Net assets (owners' equity) of new partnership Ritter's interest (1/4 of $1,080,000) Bonus to Ritter($360,000-$270,000 invested)

Cash Svenson, Capital($90,000 x 60%) Kidd, Capital($90,000 x 30%) Kohl, Capital($90,000 x 10%) Ritter, Capital To record Ritter's admission as a partner with a one-fourth interest in capital and profits upon investments of $360,000, and to divide the resulting bonus among the old partners in their relative profit-sharing ratios prior to admission of Ritter.

360,000

To record Ritter's admission as a partner with a one-fourth interest in capital and profits upon investments of $360,000, and to divide the resulting bonus among the old partners in their relative profit-sharing ratios prior to admission of Ritter.

12 A-5

120,000

180,000

$ $ $ $

720,000 200,000 920,000 230,000 30,000

230,000

720,000

360,000 $ 1,080,000 $ 270,000 $ 90,000

54,000 27,000 9,000 270,000

12 A-6
General Journal

Kim, Capital John, Capital


Ray, Capital

$ 220,000

To record transfer of three-fourths of Kim's capital to Ray and one-fourth to John.

Kim, Capital Patents Cash John, Capital (5/6 of $30,000) Ray, Capital (1/6 of $30,000) To record withdrawals of Kim from firm and settlement by him for $30,000 less than the book value of his capital account

$ 220,000

Kim, Capital John, Capital (5/6 of $30,000) Ray, Capital (1/6 Cash Notes Payable,12% To record the retirement of Partner Kim and payment of his capital account plus a bonus of $60,000. Bonus charged against continuing partners John and ray in Ratio 5:1.

$ 220,000 50,000 10,000

12 A-6

55,000 165,000

100,000 90,000 25,000 5,000

100,000 180,000

12 A-7
General Journal

Cash Loss on Sale of Business Allowance for Doubtful Accounts


Accounts Receivable

66,400 44,000 6,400

To record collections on accounts receivable, and write off balance. Liabilities Cash To pay creditors May, Capital Nix, Capital Peat, Capital Loss on Sale of Business To distribute loss among partners on 30:50:20 basis. May, Capital Nix, Capital Peat, Capital Cash ($27,200 + $66,400 - $36,800) To distribute cash as follows: Partner May Nix Peat Capital $43,200 $33,600 $24,000 Loss 13,200 22,000 8,800 Balance $30,000 $11,600 $15,200 $ 36,800

13,200 22,000 8,800

30,000 11,600 15,200

= = =

$56,800

Cash Loss on Sale of Business Allowance for Doubtful Accounts


Accounts Receivable

35,040 75,360 6,400

To record Sale of receivables, and recognize loss $ 36,800

Liabilities Cash To pay creditors in full May, Capital Nix, Capital Peat, Capital

22,608 37,680 15,072

Loss on Sale of Business To distribute loss among partners on 30:50:20 basis. May, Capital Peat, Capital Cash ($27,200 + $35,040 - $36,800) To distribute cash as follows, assuming that Nix will be unable to make up his deficiency: Partner May Nix Peat Capital $43,200 $33,600 $24,000 Loss 22,608 37,680 15,072 Balance $20,592 ($4,080) $8,928 $ 18,144 7,296

= = =

Nix's Deficiency* $ (2,448) 4,080 (1,632)

* Charged to May and Peat in 30:20 ratio.

12 A-7

116,800

36,800

44,000

56,800

116,800

36,800

75,360

25,440

Balance 18,144 7,296 $ 25,440