Reference no: EM131786361
Question 1 - The partnership agreement of Stone, Miles, and Kiney provides for annual distribution of profit and loss in the following sequence:
- Miles, the managing partner, receives a bonus of 10% of net income.
- Each partner receives 5% interest on average capital investment.
- Residual profit or loss is to be divided 4:2:4.
Average capital investments for 2011 were:
Stone $270,000
Miles $180,000
Kiney $120,000
Required:
A. Prepare a schedule to allocate net income, assuming operations for the year resulted in:
1. Net income of $75,000.
2. Net income of $15,000.
3. Net loss of $30,000.
B. Prepare the journal entry to close the Income Summary account for each situation above.
Question 2 - The NOR Partnership is being liquidated. A balance sheet prepared prior to liquidation is presented below:
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Assets
|
|
Liabilities & Equities
|
|
Cash
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$240,000
|
|
Liabilities
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$160,000
|
|
Other Assets
|
300,000
|
|
Reese, Loan
|
60,000
|
|
|
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Nen, Capital
|
180,000
|
|
|
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Ott, Capital
|
60,000
|
|
|
|
Reese, Capital
|
80,000
|
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Total Assets
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$540,000
|
|
Total Equities
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$540,000
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Nen, Ott, and Reese share profits and losses in a 40:40:20 ratio. All partners are personally insolvent.
Required:
A. Prepare the journal entries necessary to record the distribution of the available cash.
B. Prepare the journal entries necessary to record the completion of the liquidation process, assuming the other assets are sold for $120,000.
Question 3 - The partnership of Hall, Jones, and Otto has been dissolved and is in the process of liquidation. On July 1, 2011, just before the second cash distribution, the assets and equities of the partnership along with residual profit sharing ratios were as follows:
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Assets
|
|
Liabilities & Equities
|
|
Cash
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$200,000
|
|
Liabilities
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$150,000
|
|
Receivables-net
|
50,000
|
|
Hall, Capital 50%
|
100,000
|
|
Inventories
|
150,000
|
|
Jones, Capital 30%
|
175,000
|
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Equipment-net
|
100,000
|
|
Otto, Capital 20%
|
75,000
|
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Total assets
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$500,000
|
|
Total Lia & Equity
|
500,000
|
Assume that the available cash is distributed immediately, except for a $25,000 contingency fund that is withheld pending complete liquidation of the partnership. How much cash should be paid to each of the partners?