SOLUTIONS OF ASSIGNMENTS
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EXERCISE 13-1
Jan. 1 Cash............................................................................. 15,000
Accounts Receivable................................................ 14,000
Equipment.................................................................. 17,500
Allowance for Doubtful Accounts.............................. 3,000
Frank Voris, Capital...................................................... 43,500
EXERCISE 13-2
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(1) |
DIVISION OF NET INCOME |
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B.
Manilow |
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O.
Newton |
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Total |
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Salary allowance............................. Interest allowance
B. Manilow ($50,000 X 10%)......
O. Newton ($40,000 X 10%)......
Total interest......................
Total salaries and interest...............
Remaining income, $14,000 ($55,000 – $41,000)
B. Manilow ($14,000 X 70%)......
O. Newton ($14,000 X 30%)......
Total remainder..................
Total division................................... |
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$20,000 5,000 000,000 25,000 9,800 000,000 $34,800 |
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$12,000 4,000 000,000 16,000 4,200 000,000 $20,200 |
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$32,000 9,000 41,000 14,000 $55,000 |
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(2) |
DIVISION OF NET INCOME |
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B.
Manilow |
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O.
Newton |
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Total |
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Salary allowance............................. Interest allowance........................... Total salaries and interest...............
Remaining deficiency, ($11,000) ($41,000 – $30,000)
B. Manilow ($11,000 X 70%)......
O. Newton ($11,000 X 30%)......
Total remainder..................
Total division................................... |
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($20,000) ( 5,000) ( 25,000) ( (7,700) (000,000) ($17,300) |
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($12,000) ( 4,000) ( 16,000) ( (3,300) (000,000) ($12,700) |
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$32,000 9,000 41,000 (11,000 $30,000 |
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(b) (1) Income Summary...................................................... 55,000
B. Manilow, Capital....................................................... 34,800
O. Newton, Capital......................................................... 20,200
(2) Income Summary...................................................... 30,000
B. Manilow, Capital....................................................... 17,300
O. Newton, Capital......................................................... 12,700
EXERCISE 13-3
(a) FLEETWOOD MAC
Partners’ Capital Statement
For the Year Ended December 31, 2002
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K. Tucki |
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C. Cross |
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Total |
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Capital, January 1 Add: Net income Less: Drawings Capital, December 31 |
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$20,000 16,000 36,000 8,000 $28,000 |
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$18,000 16,000 34,000 3,000 $31,000 |
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$38,000 32,000 70,000 11,000 $59,000 |
(b) FLEETWOOD MAC
Partial Balance Sheet
December 31, 2002
Owners’ equity
K. Tucki, Capital.................................................... $28,000
C. Cross, Capital................................................... 31,000
Total owners’ equity.................................................. $59,000
EXERCISE 13-5
(a) Cash................................................................................... 100,000
Joe Keho, Capital (6/10 X $22,000)..................................... 13,200
Mike McLain, Capital (4/10 X $22,000)............................... 7,800
Liz Hurley, Capital.................................................................. 78,000
Total capital of existing partnership...... $160,000
Investment by new partner, Hurley........ 100,000
Total capital of new partnership............. $260,000
Hurley’s capital credit................................
$78,000
(30% X $260,000)
Investment by new partner, Hurley........ $100,000
Hurley’s capital credit................................ 78,000
Bonus to old partners............................... $ 22,000
(b) Cash................................................................................... 36,000
Joe Keho, Capital (6/10 X $22,800)............................... 13,680
Mike McLain, Capital (4/10 X $22,800)......................... 9,120
Liz Hurley, Capital.................................................................. 58,800
Total capital of existing partnership...... $160,000
Investment by new partner, Hurley........ 36,000
Total capital of new partnership............. $196,000
Hurley’s capital credit................................ $58,800
(30% X $196,000)
Investment by new partner, Hurley........... $36,000
Hurley’s capital credit.................................. 58,800
Bonus to new partner.................................. $22,800
EXERCISE 13-7
(a) Rocky Rim, Capital............................................................ 75,000
Dale Nagel, Capital ($10,500 X 5/7)................................ 7,500
Todd Rundgren, Capital ($10,500 X 2/7)....................... 3,000
Cash......................................................................................... 85,500
Capital balance of withdrawing
partner........................................................ $75,000
Payment to withdrawing partner............... 85,500
Bonus to retiring partner............................ $10,500
Allocation of bonus
Nagel, Capital........................ $7,500
($10,500 X 5/7)
Rundgren, Capital................ 3,000 $10,500
($10,500 X 2/7)
(b) Rocky Rim, Capital............................................................ 75,000
Dale Nagel, Capital ($7,000 X 5/7)...................................... 5,000
Todd Rundgren, Capital ($7,000 X 2/7)............................. 2,000
Cash......................................................................................... 68,000
Capital balance of withdrawing
partner........................................................ $75,000
Payment to withdrawing partner............... 68,000
Bonus to remaining partners..................... $ 7,000
Allocation of bonus
Nagel, Capital.......................... $5,000
($7,000 X 5/7)
Rundgren, Capital.................. 2,000 $7,000
($7,000 X 2/7)
EXERCISE 13-8
THE PIPS COMPANY
Schedule of Cash Payments
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Cash |
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Noncash Assets |
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Liabilities |
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Agnes Capital |
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Mildred Capital |
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Balances before liquidation Sale of noncash assets and allo- cation of gain New balances Pay liabilities New balances Cash distribution to partners Final balances |
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$ 20,000 120,000 140,000 (55,000 85,000 (85,000 $ 0 |
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($100,000) ( (100,000) (
0) (0000,000) ( 0) (0000,000) ($ 0) |
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($55,000) (0000,00) ( 55,000) ( (55,000) ( 0) (0000,00) ($ 0) |
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$45,000 11,000 56,000 0000,00 56,000 (56,000 $ 0 |
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$20,000 9,000 29,000 0000,00 29,000 (29,000 $ 0 |
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EXERCISE 13-10
(a) (1) Cash............................................................................. 2,000
Lou, Capital.................................................................... 2,000
(2) Maureen, Capital....................................................... 18,000
Ellen, Capital.............................................................. 14,000
Cash................................................................................. 32,000
(b) (1) Maureen, Capital ($2,000 X 5/8).............................. 1,250
Ellen, Capital ($2,000 X 3/8)..................................... 750
Lou, Capital.................................................................... 2,000
(2) Maureen, Capital ($18,000 – $1,250)..................... 16,750
Ellen, Capital ($14,000 – $750)................................ 13,250
Cash............................................................... 30,000
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PROBLEM 13-2A |
(a) 1. Income Summary....................................................... 28,000
Teena Marie, Capital ($28,000 X 60%)....................... 16,800
Robin Tower, Capital ($28,000 X 30%)....................... 8,400
George Clinton, Capital................................................ 2,800
($28,000 X 10%)
2. Income Summary....................................................... 34,000
Teena Marie, Capital ($18,000 + $2,000)................... 20,000
Robin Tower, Capital ($10,000 + $2,000)................... 12,000
George Clinton, Capital ($0 + $2,000)........................ 2,000
Net income.................................. $34,000
Salary allowance
Marie........................................ (18,000 )
Tower...................................... (10,000 )
Remainder.............................. $ 6,000
To each partner......................... $ 2,000
($6,000 X 1/3)
3. Income Summary....................................................... 22,000
Teena Marie, Capital..................................................... 18,700
($4,800 + $15,000 – $1,100)
Robin Tower, Capital ($3,000 – $1,100)..................... 1,900
George Clinton, Capital................................................ 1,400
($2,500 – $1,100)
Net income.................................. $22,000
Interest allowance
Marie ($48,000 X 10%).......... (4,800 )
Tower ($30,000 X 10%)........ (3,000 )
Clinton ($25,000 X 10%)....... (2,500 )
Balance....................................... 11,700
Salary allowance
Marie........................................ (15,000 )
Remainder.............................. $ (3,300 )
To each partner......................... $ (1,100 )
($3,300 X 1/3)
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(b) |
DIVISION OF NET INCOME |
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Teena Marie |
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Robin Tower |
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George Clinton |
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Total |
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Salary allowance....................... Interest allowance
Teena Marie........................
($48,000 X 10%)
Robin Tower.......................
($30,000 X 10%)
George Clinton...................
($25,000 X 10%)
Total interest...............
Total salaries and interest........
Remaining deficiency, ($3,300)
Teena Marie........................
($3,300 X 1/3)
Robin Tower.......................
($3,300 X 1/3)
George Clinton...................
($3,300 X 1/3)
Total remainder............ Total division............................ |
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$15,000 4,800 ( 000,000 19,800 (1,100 000,000 $18,700 |
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$3,000 00,000 3,000 (1,100 00,000 $1,900 |
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( ($2,500) (00,000) ( 2,500) ( (1,100) (00,000) ($1,400) |
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$15,000 ( 10,300 25,300 (3,300 $22,000 |
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(c) MTC COMPANY
Partners’ Capital Statement
For the Year Ended December 31, 2002
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Teena Marie |
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Robin Tower |
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George Clinton |
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Total |
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Capital, January 1........ Add: Net income........ Less: Drawings........... Capital, December 31.. |
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$48,000 18,700 66,700 23,000 $43,700 |
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$30,000 1,900 31,900 14,000 $17,900 |
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$25,000 1,400 26,400 10,000 $16,400 |
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$103,000 22,000 125,000 47,000 $ 78,000 |
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PROBLEM 13-3A |
(a) (1) T. Wuhan, Capital...................................................... 6,000
M. Otton, Capital............................................................ 6,000
(2) T. Tritt, Capital........................................................... 12,000
M. Otton, Capital............................................................ 12,000
(3) Cash............................................................................. 70,000
A. Nolan, Capital (50% X $16,000).............................. 8,000
T. Tritt, Capital (40% X $16,000)................................. 6,400
T. Wuhan, Capital (10% X $16,000)............................ 1,600
M. Otton, Capital............................................................ 54,000
Total capital of existing
partnership......................... $110,000
Investment by Otton.............. 70,000
Total capital of new
partnership.........................
$180,000
Otton’s capital credit............. $54,000
($180,000 X 30%)
Investment by new
partner, Otton..................... $70,000
Otton’s capital credit............. 54,000
Bonus to old partners........... $16,000
(4) Cash............................................................................. 40,000
A. Nolan, Capital ($5,000 X 50%)............................ 2,500
T. Tritt, Capital ($5,000 X 40%)............................... 2,000
T. Wuhan, Capital ($5,000 X 10%).......................... 500
M. Otton, Capital............................................................ 45,000
Total capital of existing
partnership......................... $110,000
Investment by Otton.............. 40,000
Total capital of new
partnership......................... $150,000
PROBLEM 13-3A (Continued)
Otton’s capital credit................ $45,000
($150,000 X 30%)
Investment by new
partner.................................... $40,000
Otton’s capital credit................
45,000
Bonus to new partner.............. $ 5,000
(b) (1) Total capital after admission ($30,000 ÷ 20%).................. $150,000
Total capital before admission........................................... 110,000
Cash investment by Otton................................................... $ 40,000
(2) Decrease in Tritt’s equity ($36,000 – $30,000)................. $6,000
Tritt’s income ratio......................................................................... 40%
Bonus to new partner ($6,000 ÷ 40%)................................ $15,000
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PROBLEM 13-4A |
(a) 1. D. Guehler, Capital..................................................... 34,000
L. Hamilton, Capital........................................................ 17,000
M. McGovern, Capital................................................... 17,000
2. D. Guehler, Capital..................................................... 34,000
M. McGovern, Capital................................................... 34,000
3. D. Guehler, Capital..................................................... 34,000
L. Hamilton, Capital ($4,000 X 5/8).......................... 2,500
M. McGovern, Capital ($4,000 X 3/8)...................... 1,500
Cash................................................................................. 38,000
Guehler’s capital balance....... $34,000
Payment to Guehler.................. 38,000
Bonus to Guehler...................... $ 4,000
4. D. Guehler, Capital..................................................... 34,000
L. Hamilton, Capital ($6,000 X 5/8).............................. 3,750
M. McGovern, Capital ($6,000 X 3/8).......................... 2,250
Cash................................................................................. 28,000
Guehler’s capital balance....... $34,000
Payment to Guehler.................. 28,000
Bonus to old partners.............. $ 6,000
(b) (1) McGovern’s capital after withdrawal.................................. $43,000
McGovern’s capital before withdrawal.............................. 40,000
Bonus to McGovern............................................................... 3,000
McGovern’s income ratio with Hamilton............................. 3/8
Total bonus ($3,000 ÷ 3/8)............................................. $ 8,000
(2) Guehler’s capital balance..................................................... $34,000
Total bonus to other partners.............................................. (8,000 )
Cash paid to Guehler..................................................... $26,000
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PROBLEM 13-5A |
(a) (1)
Cash..................................................................................... 53,000
Allowance for Doubtful Accounts.................................. 1,000
Accumulated Depreciation............................................. 5,500
Loss on Realization.......................................................... 21,000
Accounts Receivable........................................................... 25,000
Merchandise Inventory....................................................... 34,500
Equipment.............................................................................. 21,000
Noncash assets (net)....................... $74,000
Sale proceeds................................... 53,000
Loss on sale of noncash
assets............................................. $21,000
(2)
S. Wilkowski, Capital ($21,000 X 5/10)........................... 10,500
J. Harkins, Capital ($21,000 X 3/10)............................... 6,300
Mick Jagger, Capital ($21,000 X 2/10)........................... 4,200
Loss on Realization.............................................................. 21,000
(3)
Notes Payable.................................................................... 13,500
Accounts Payable............................................................. 27,000
Wages Payable.................................................................. 3,800
Cash......................................................................................... 44,300
(4)
Cash..................................................................................... 3,000
Mick Jagger, Capital............................................................. 3,000
(5)
S. Wilkowski, Capital........................................................ 25,500
J. Harkins, Capital............................................................. 13,700
Cash......................................................................................... 39,200
(b)
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S. Wilkowski, Capital |
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Bal. 27,500 (1) 53,000 (4) 3,000 |
(3) 44,300 (5) 39,200 |
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(2) 10,500 (4) 25,500 |
Bal. 36,000 |
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83,500 |
83,500 |
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36,000 |
36,000 |
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J. Harkins, Capital |
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Mick Jagger, Capital |
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(2) 6,300 (4) 13,700 |
Bal. 20,000 |
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(2) 4,200 |
Bal. 1,200 (4) 3,000 |
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20,000 |
20,000 |
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4,200 |
4,200 |
(c) (1) S. Wilkowski, Capital ($3,000 X 5/8)....................... 1,875
J. Harkins, Capital ($3,000 X 3/8)............................ 1,125
Mick Jagger, Capital..................................................... 3,000
(2) S. Wilkowski, Capital ($25,500 – $1,875)............... 23,625
J. Harkins, Capital ($13,700 – $1,125)................... 12,575
Cash ($39,200 – $3,000)............................................... 36,200