Reference no: EM132250426
Question 1 - The Distance Plus partnership has the following capital balances at the beginning of the current year:
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Tiger (50% of profits and losses)
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$165,000
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Phil (20%)
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135,000
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Ernie (30%)
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150,000
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Each of the following questions should be viewed independently.
a. If Sergio invests $190.000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used.
b. If Sergio invests $100,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used.
c. If Sergio invests $120.000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the goodwill method is used.
Question 2 - The partnership agreement of Jones, King, and Lane provides for the annual allocation of the business's profit or loss in the following sequence:
- Jones, the managing partner, receives a bonus equal to 25 percent of the business's profit.
- Each partner receives 20 percent interest on average capital investment.
- Any residual profit or loss is divided equally.
The average capital investments for 2018 were as follows:
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Jones
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$185,000
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King
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370,000
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Lane
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555,000
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How much of the $82,000 partnership profit for 2018 should be assigned to each partner?
Question 3 - The E.N.D. partnership has the following capital balances as of the end of the current year:
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Pineda
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$140,000
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Adams
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120,000
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Fergie
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110,000
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Gomez
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100,000
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Total capital
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$470,000
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Answer each of the following independent questions:
a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $140,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners?
b. Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $340.000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners? (Do not round your intermediate calculations. Round your final answers to the nearest dollar amounts.)
Question 4 - The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.
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Cash
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$47,000
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Liabilities
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$37,000
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Land
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165,000
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Adams, capital
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99,000
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Building
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155,000
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Baker, capital
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48,000
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|
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Carvil, capital
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74,000
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|
|
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Dobbs, capital
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109,000
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Total assets
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$367,000
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Total liabilities and capital
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$367,000
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To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an independent situation related to the partnership's liquidation.
a. The $10000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided?
b. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10.000 be divided?
c. The building is immediately sold for $77,000 to give total cash of $124,000. The liabilities are then paid, leaving a cash balance of $87,000. This cash is to be distributed to the partners. How much of this money will each partner receive if profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:3:3 basis, respectively? (Do not round intermediate calculations.)
d. Assume that profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:4:2 basis, respectively. How much money must the firm receive from selling the land and building to ensure that Carvil receives a portion? (Do not round intermediate calculations.)
Question 5 - A local partnership is liquidating and has only two assets (cash of $10,000 and land with a cost of $35,000). All partnership liabilities have been paid. All partners are personally insolvent. The partners have capital balances and share profits and losses as follows.
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Brown, capital (40%)
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$25,000
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Fish, capital (30%)
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15,000
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Stone, capital (30%)
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5,000
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a. If the land is sold for $25,000, how much cash does each partner receive in a final settlement?
b. If the land is sold for $15,000, how much cash does each partner receive in a final settlement?
c. If the land is sold for $5,000, how much cash does each partner receive in a final settlement?
Question 6 - Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,000. At the date the partnership ceases operations, the balance sheet is as follows:
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Cash
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$50,000
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Liabilities
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$40,000
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Noncash assets
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150,000
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Alex, capital
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90,000
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|
|
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Bess, capital
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70,000
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Total assets
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$200,000
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Total liabilities and capital
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$200,000
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Part A: Prepare journal entries for the following transactions:
a. Distributed safe cash payments to the partners.
b. Paid $30.000 of the partnership's liabilities.
c. Sold noncash assets for $160,000.
d. Distributed safe cash payments to the partners.
e. Paid remaining partnership liabilities of $10,000.
f. Paid $4,000 in liquidation expenses: no further expenses will be incurred.
g. Distributed remaining cash held by the business to the partners.
Part B: Prepare a final statement of partnership liquidation.