DFA5038 Tutorial Solution Chapter 3

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					                                                 DFA 5038 (Financial Accounting 3) /Chapter 3


                           TUTORIAL 3 SOLUTION
                       ACCOUNTING FOR PARTNERSHIP

Question 1

Dauber and Jackson decide to organize a partnership. Dauber invests RM25,000
cash, and Jackson contributes RM5,000 and equipment having a book value of
RM3,500 and a fair market value of RM10,000.

Instructions
Prepare the entry to record each partner’s investment.

Answer 1

 Date          Account Title and Explanation         Ref       Debit            Credit
          Cash                                                  25,000
             Dauber, Capital                                                       25,000
          Cash                                                    5,000
          Equipment                                              10,000
             Jackson, Capital                                                      15,000


Question 2

Mark Bahr and Robert Engler decide to form a partnership. Bahr invests
RM25,000 cash and accounts receivable of RM30,000 less allowance for doubtful
accounts of RM2,000. Engler contributes RM20,000 cash and equipment having
a RM6,000 book value. It is agreed that the allowance account should be
RM3,000 and the fair market value of the equipment is RM10,000.
Instructions
Prepare the necessary journal entry to record the formation of the partnership.

Answer 2

 Date          Account Title and Explanation         Ref       Debit            Credit
          Cash                                                  25,000
          Accounts Receivable                                   30,000
             Allowance for Doubtful Accounts                                        3,000
             Bahr, Capital                                                         52,000
          Cash                                                   20,000
          Equipment                                              10,000
             Engler, Capital                                                       30,000




lsy2010
                                                  DFA 5038 (Financial Accounting 3) /Chapter 3


Question 3

The post closing trial balances of two proprietorships on January 1, 2008 are
presented below.
                                   Dan Company               John Company
                                 Dr(RM)       Cr(RM)       Dr(RM)     Cr(RM)
Cash                              9,500                     6,000
Account receivable               15,000                    23,000
Allowance for doubtful account                 2,500                   4,000
Merchandise inventory            28,000                    17,000
Equipment                        50,000                    30,000
Acc. depreciation-equipment                   24,000                   13,000
Note payable                                  20,000
Account payable                               25,000                   37,000
Dan,capital                                   31,000
John,capital                                                           22,000
                                 102,500      102,500      76,000     76,000

Dan and John decide to form a partnership, Blues Brothers Company with the
following agreed upon variations for noncash assets.

                                 Dan Company                  John Company
Account receivable                 RM 15,000                     RM 23,000
Allowance for doubtful account         3,500                         5,000
Merchandise inventory                 32,000                        24,000
Equipment                             31,000                        18,000

All cash will be transferred to the partnership and the partnership will assume
all the liabilities of the two proprietorships. Further it is agreed that Dan will
invest RM3,000 in cash and John will invest RM13,000 in cash.

Instructions
a) Prepare separate journal entries to record the transfer of each
    proprietorship’s assets and liabilities to the partnership.
b) Journalize the additional cash investment by each partner.
c) Prepare a balance sheet for the partnership on January 1, 2008.

Answer 3
(a)
 Date        Account Title and Explanation            Ref       Debit            Credit
2008    Cash                                                      9,500
Jan 1   Accounts Receivable                                      15,000
        Merchandise Inventory                                    32,000
        Equipment                                                31,000
           Allowance for doubtful accounts                                           3,500
           Note Payable                                                             20,000
           Accounts Payable                                                         25,000
           Dan, Capital                                                             39,000
lsy2010
                                                         DFA 5038 (Financial Accounting 3) /Chapter 3


          Cash                                                            6,000
          Accounts Receivable                                            23,000
          Merchandise Inventory                                          24,000
          Equipment                                                      18,000
             Allowance for doubtful accounts                                                5,000
             Accounts Payable                                                              37,000
             John, Capital                                                                 29,000

(b)
 Date            Account Title and Explanation               Ref       Debit            Credit
2008      Cash                                                           3,000
Jan 1        Dan, Capital                                                                    3,000
          Cash                                                           13,000
             John, Capital                                                                 13,000



c)                                      BLUES BROTHERS COMPANY
                                           Balance Sheet
                                        as at 1 January 2008
                                          Assets
Current assets
Cash (9,500 + 6,000 + 3,000 + 13,000) .............................             RM 31,500
Accounts receivable (15,000 + 23,000) .................RM 38,000
Less: Allowance for doubtful accounts (3,500+5,000)             8,500                29,500
Merchandise inventory (32,000 + 24,000) ..........................                   56,000
     Total current assets ............................................              117,000

Property, plant, and equipment
Equipment (31,000 + 18,000) ........................................               49,000
     Total assets ......................................................        RM166,000

                            Liabilities and Owners’ Equity
Current liabilities
Notes payable .......................................................           RM 20,000
Accounts payable (25,000 + 37,000) ................................                62,000
     Total current liabilities ........................................            82,000

Owners’ equity
Dan, Capital (39,000 + 3,000) ........................................          RM 42,000
John, Capital (29,000 + 13,000) .....................................              42,000
     Total owners’ equity ...........................................              84,000
           Total liabilities and owners’ equity ...................             RM166,000

lsy2010
                                                           DFA 5038 (Financial Accounting 3) /Chapter 3


Question 4

The Frick & Frack Co. reports net income of RM28,000. Interest allowances are
Frick RM3,000 and Frack RM5,000; partner salary allowances are Frick RM18,000
and Frack RM10,000 and the remainder is shared equally.

Instructions
Indicate the division of net income to each partner, and prepare the entry to
distribute the net income.

Answer 4
                                        Division of Net Income
                                                                Frick            Frack             Total
Salary allowance                                              RM18,000         RM10,000         RM28,000
Interest allowance on partners’ capital                          3,000            5,000            8,000
Total salaries and interest                                     21,000           15,000           36,000
Remaining deficiency,(RM8,000)
       (28,000 – 36,000)
        Frick (8,000 × 50%)                                        (4,000)
        Frack (8,000 × 50%)                                                        (4,000)
        Total remainder                                                                           (8,000)
Total division of net income                                  RM17,000         RM11,000         RM28,000

 Date           Account Title and Explanation                  Ref       Debit            Credit
           Income Summary                                                 28,000
              Frick, Capital                                                                 17,000
              Frack, Capital                                                                 11,000

Question 5

The adjusted trial balance of the Melton and Yount Partnership for the year
ended December 31, 2010, appears below:

                           MELTON AND YOUNT PARTNERSHIP
                                Adjusted Trial Balance
                                 December 31, 2010
                                                                                    Debit             Credit
Current Assets ...........................................................         19,000
Plant Assets ..............................................................        80,000
Current Liabilities ......................................................                           7,000
Long-term Debt .........................................................                            50,000
Melton, Capital ..........................................................                          20,000
Melton, Drawing.........................................................             4,000
Yount, Capital ...........................................................                          18,000
Yount, Drawing ..........................................................            7,000
Sales ......................................................................                      100,000
Cost of Goods Sold ......................................................          62,000
Operating Expenses.....................................................            23,000
                                                                                  195,000         195,000
lsy2010
                                                      DFA 5038 (Financial Accounting 3) /Chapter 3


The partnership agreement stipulates that a division of partnership net income
or net loss is to be made as follows:
1. A salary allowance of RM12,000 to Melton and RM23,000 to Yount.
2. The remainder is to be divided equally.
Instructions
a) Prepare a schedule which shows the division of net income to each
     partner.
b) Prepare the closing entries for the division of net income and for the
     drawing accounts at December 31, 2010.


Answer 5

a)        Schedule for Division of Net Income
             Sales                                                 RM100,000
             Cost of goods sold                                       62,000
             Gross profit                                             38,000
             Operating expenses                                       23,000
             Net income                                            RM 15,000

                                                  Melton              Yount                Total
Salary allowance                                RM12,000           RM23,000              RM35,000
Remaining deficiency, (RM20,000)
     Melton (20,000) × 50%                         (10,000)
     Yount (20,000) × 50%                                             (10,000)
         Total remainder                                                                  (20,000)
Total division                                  RM 2,000           RM13,000              RM15,000

 Date              Account Title and Explanation          Ref       Debit            Credit
Dec 31        Income Summary                                         15,000
                 Melton, Capital                                                         2,000
                 Yount, Capital                                                         13,000
              Melton, Capital                                          4,000
              Yount, Capital                                           7,000
                Melton, Drawing                                                           4,000
                 Yount, Drawing                                                           7,000


Question 6

Northern Co. had beginning capital balances on January 1, 2010, as follows:
Andy Golic RM30,000 and Jim Carney RM25,000. During the year, drawings were
Golic RM15,000 and Carney RM8,000. Net income was RM50,000, and the
partners share income equally.

Instructions
Prepare the partners’ capital statement for the year.
lsy2010
                                                         DFA 5038 (Financial Accounting 3) /Chapter 3


Answer 6
                                   NORTHERN COMPANY
                                Partners’ Capital Statement
                        For the year ended 31 December 2010

                                     Golic            Carney                  Total
Beginning Capital                  RM30,000         RM25,000               RM55,000
Add: Net Income                      25,000           25,000                 50,000
                                     55,000           50,000                105,000
Less: Drawings                       15,000            8,000                 23,000
Ending Capital                     RM40,000         RM42,000               RM82,000


Question 7

Ace, Goran, and Notte are forming The Acgono Partnership. Ace is transferring
RM45,000 of personal cash and equipment worth RM38,000 to the partnership.
Goran owns land worth RM27,000 and a small building worth RM112,000, which
he transfers to the partnership. There is a long-term mortgage of RM30,000 on
the land and building, which the partnership assumes. Notte transfers cash of
RM10,000, accounts receivable of RM54,000, supplies worth RM5,000, and
equipment worth RM33,000 to the partnership. The partnership expects to
collect RM48,000 of the accounts receivable.
Instructions
Prepare a classified balance sheet for the partnership after the partner’s
investments on December 31, 2010.

Answer 7
                              THE ACGONO PARTNERSHIP
                                    Balance Sheet
                                 December 31, 2010

                                         Assets
Current Assets
Cash (45,000 + 10,000) ....................................                    RM55,000
Accounts Receivable .......................................         RM54,000
Less: Allowance for Doubtful Accounts ..................              (6,000)    48,000
Supplies ....................................................          5,000 ________
     Total current assets ..................................                  RM108,000

Property, Plant and Equipment
Land       ...................................................     RM27,000
Building ....................................................       112,000
Equipment ...................................................        71,000
     Total property, plant, and equipment ............                                210,000
          Total assets ......................................                       RM318,000


lsy2010
                                                         DFA 5038 (Financial Accounting 3) /Chapter 3


                          Liabilities and Owners’ Equity
Long-term Liabilities
Mortgage Payable ...........................................                       RM30,000

Owners’ Equity
Ace, Capital .................................................      RM83,000
Goran, Capital...............................................        109,000
Notte, Capital ...............................................        96,000
     Total owners’ equity .................................                         288,000
          Total liabilities and owners’ equity ..........                         RM318,000


Question 8

At the end of its first year of operations on December 31, 2008 the BBB
Company’s accounts show the following.

               Partner                Drawings                    Capital
               J.Bach                 RM 12,000                  RM 33,000
               L.Beethovan                9,000                     20,000
               J.Brahms                   4,000                     10,000

The capital balance represents each partner’s initial capital investment.
Therefore net income or net loss for 2008 has not been closed to the partners’
capital accounts.

Instructions
a) Journalize the entry to record the division of net income for 2008 under
    each of the following independent assumptions.
    1. Net income is RM 34,000. Income is shared 5:3:2.
    2. Net income is RM 30,000. Bach and Beethovan are given salary
       allowances of RM 11,000 and RM 8,500 respectively. The remainder is
       shared equally.
    3. Net income is RM 25,200. Each partner is allowed interest of 10% on
       beginning capital balances. Bach is given an RM 18,000 salary allowance.
       The remainder is shared equally.
b) Prepare a schedule showing the division of net income under assumption (3)
    above.
c) Prepare a partners’ capital statement for the year under assumption (3)
    above.




lsy2010
                                                       DFA 5038 (Financial Accounting 3) /Chapter 3


Answer 8
(1)
 Date        Account Title and Explanation                 Ref       Debit            Credit
2008    Income Summary                                                34,000
Dec 31     J.Bach, Capital                                                               17,000
           L.Beethovan, Capital                                                          10,200
           J.Brahms, Capital                                                              6,800

(2)
 Date          Account Title and Explanation               Ref       Debit            Credit
2008      Income Summary                                              30,000
Dec 31       J.Bach, Capital (11,000 + 3,500)                                            14,500
             L.Beethovan, Capital (8,500 + 3,500)                                        12,000
             J.Brahms, Capital                                                            3,500

                  Net income .............................         RM30,000
                  Salary allowances
                     Bach ..................................        (11,000)
                     Beethovan ...........................           (8,500)
                  Remainder ..............................        RM10,500
                  To each partner (1/3 x 10,500) ......           RM 3,500

(3)
 Date          Account Title and Explanation               Ref       Debit            Credit
2008      Income Summary                                              25,200
Dec 31       J.Bach, Capital (3,300+18,000+3,500)                                        21,600
             L.Beethovan, Capital (2,000 + 300)                                           2,300
             J.Brahms, Capital (1,000 + 300)                                              1,300

                   Net income .............................        RM25,200
                   Interest allowance
                      Bach (10% x 33,000)................              (3,300)
                      Beethovan (10% x 20,000) .........               (2,000)
                      Brahms (10% x 10,000) ............               (1,000)
                   Balance .................................           18,900
                   Salary allowance
                      Bach ..................................       (18,000)
                   Remainder ..............................       RM 900
                   To each partner (1/3 x 900) .........          RM 300




lsy2010
                                                                DFA 5038 (Financial Accounting 3) /Chapter 3


b)                                         DIVISION OF NET INCOME
                                                    J. Bach   L.Beethovan J. Brahms Total
                                                      RM          RM          RM    RM
      Salary allowance ......................         18,000                                (          18,000
      Interest allowance
           J. Bach (10% x 33,000) .........           3,300
           L. Beethovan (10% x 20,000) ...              (              2,000                                   (
           J. Brahms (10% x 10,000) .......                                              1,000
                Total interest ...............                                                          6,300
      Total salaries and interest ...........         21,300           2,000             1,000         24,300
      Remaining income, RM900
           J. Bach(1/3 x 900) ...............            300
           L. Beethovan (1/3 x 900) .......                             300
           J. Brahms (1/3 x 900) ...........                                                 300
                Total remainder ............                                                      900
      Total division ..........................   RM21,600        RM2,300              RM1,300 RM25,200




       c)                                            BBB COMPANY
                                               Partners’ Capital Statement
                                         For the Year Ended December 31, 2008

                                             J.Bach       L. Beethovan           J. Brahms           Total
     Capital, January 1 ................    RM33,000          RM20,000           RM10,000            RM63,000
     Add: Net income ................        21,600             2,300              1,300              25,200
                                             54,600            22,300             11,300              88,200
     Less: Drawings ....................     12,000             9,000              4,000              25,000
     Capital, December 31 ............      RM42,600          RM13,300           RM 7,300            RM63,200


       Question 9

       Donna Leeds and Ann Reeves have capital accounts of RM480,000 and
       RM420,000, respectively. Jeff Evans and Pete Patton are to join the
       partnership. Evans invests RM450,000 in the partnership for which he receives a
       capital credit of RM450,000. Patton purchases a one-half interest from Leeds
       for RM300,000 and a one-fourth interest from Reeves for RM90,000.

       Instructions:
       a) Prepare the journal entries to record the admission of Evans and Patton to
            the partnership.
       b)    Determine the capital balances of the partners after the admission of
             Evans and Patton.
       lsy2010
                                                   DFA 5038 (Financial Accounting 3) /Chapter 3


Answer 9

 Date            Account Title and Explanation         Ref       Debit            Credit
2008       Cash                                                  450,000
Dec 31        Evans, Capital                                                       450,000
           Leeds, Capital (1/2 x 480,000)                        240,000
           Reeves, Capital (1/4 x 420,000)                       105,000
              Patton, Capital                                                      345,000


(b) Mills (480,000 – 240,000)                       RM 240,000
    Reeves (420,000 – 105,000)                          315,000
    Evans                                               450,000
    Patton                                              345,000
          Total Capital                             RM1,350,000



Question 10

At April 30, partners’ capital balances in DLM Company are : Donatello
RM49,000, Leonardo RM28,000 and Michaelangelo RM20,000. The income
sharing ratios are 5:3:2 respectively. On May 1, the DLMR Company is formed
by admitting Rafael to the firm as a partner.

Instructions
Journalize the admission of Rafael under each of the following independent
assumptions.
      1. Rafael purchases 50% of Michaelangelo’s ownership interest by paying
         Michaelangelo RM9,000 in cash.
      2. Rafael purchases 50% of Leonardo’s ownership interest by paying
         Leonardo RM15,000 in cash.
      3. Rafael invests RM38,000 cash in the partnership for a 40% ownership
         interest that includes a bonus to the new partner.
      4. Rafael invests RM30,000 in the partnership for a 15% ownership interest
         and bonuses are given to the old partners.


Answer 10

 Date           Account Title and Explanation          Ref       Debit            Credit
(1)        Michaelangelo, Capital (50% x 20,000)                  10,000
              Rafael, Capital                                                        10,000
(2)        Leonardo, Capital (50% x 28,000)                        14,000
              Rafael, Capital                                                        14,000
lsy2010
                                                         DFA 5038 (Financial Accounting 3) /Chapter 3




 Date             Account Title and Explanation              Ref       Debit            Credit
(3)        Cash                                                         38,000
           Donatello, Capital (5/10 x 16,000)                            8,000
           Leonardo, Capital (3/10 x 16,000)                             4,800
           Michaelangelo, Capital (2/10 x 16,000)                        3,200
              Rafael, Capital                                                              54,000


             Total capital of existing partnership ........... RM 97,000
             Investment by Rafael ........................        38,000
             Total capital of new partnership...........      RM135,000
             Rafael’s capital credit (40% x 135,000) ...       RM 54,000

             Investment by new partner, Rafael .......              RM 38,000
             Rafael’s capital credit .......................           54,000
             Bonus to new partner ........................           RM16,000

 Date            Account Title and Explanation               Ref       Debit            Credit
(4)       Cash                                                          30,000
             Donatello, Capital (5/10 x 10,950)                                             5,475
             Leonardo, Capital (3/10 x 10,950)                                              3,285
             Michaelangelo, Capital (2/10 x 10,950)                                         2,190
             Rafael, Capital                                                               19,050

          Total capital of existing partnership ..........         RM 97,000
          Investment by Rafael ............................           30,000
          Total capital of new partnership ...............         RM127,000
          Rafael’s capital credit (15% x 127,000) ........         RM 19,050

          Investment by new partner, Rafael.............             RM30,000
          Rafael’s capital credit ............................         19,050
          Bonus to old partners .............................        RM10,950



Question 11

On December 31, the capital balances and income ratios in the Sesame
Company are as follows.
            Partner      Capital balances    Income ratio
            A.Bert          RM 70,000              60%
            L.Ernie             30,000             30%
            B.Bird              24,500             10%

lsy2010
                                                     DFA 5038 (Financial Accounting 3) /Chapter 3


Instructions
Journalize the withdrawal of Bird under each of the following independent
assumptions.
    1. Each of the remaining partners agrees to pay RM13,000 in cash from
       personal funds to purchase Bird’s ownership equity. Each receives 50% of
       Bird’s equity.
    2. Ernie agrees to purchase Bird’s ownership interest for RM18,000 in cash.
    3. From partnership assets, Bird is paid RM29,000 which includes a bonus to
       a retiring partner.
    4. Bird is paid RM14,000 from partnership assets. Bonuses to the remaining
       partners are recognized.

Answer 11

 Date           Account Title and Explanation            Ref       Debit            Credit
(1)       B.Bird, Capital                                           24,500
             A.Bert, Capital (1/2 x 24,500)                                            12,250
             L.Ernie, Capital (1/2 x 24,500)                                           12,250

 Date           Account Title and Explanation            Ref       Debit            Credit
(2)       B.Bird, Capital                                           24,500
             L.Ernie, Capital                                                          24,500

 Date           Account Title and Explanation            Ref       Debit            Credit
(3)       B.Bird, Capital                                           24,500
          A.Bert, Capital (6/9 x 4,500)                              3,000
          L.Ernie, Capital (3/9 x 4,500)                             1,500
             Cash                                                                      29,000
             Bird’s capital balance ............................ RM24,500
             Payment to Bird ............................          29,000
             Bonus to Bird ................................     RM 4,500

 Date           Account Title and Explanation            Ref       Debit            Credit
(4)       B.Bird, Capital                                           24,500
             A.Bert, Capital (6/9 x 10,500)                                             7,000
             L.Ernie, Capital (3/9 x 10,500)                                            3,500
             Cash                                                                      14,000

             Bird’s capital balance ......................       RM24,500
             Payment to Bird ............................          14,000
             Bonus to remaining partners ..............          RM10,500




lsy2010
                                                        DFA 5038 (Financial Accounting 3) /Chapter 3


Question 12

Dobson, Lancaster, and Pender are partners who share profits and losses 50%,
30%, and 20%, respectively. Their capital balances are RM150,000, RM90,000,
and RM60,000, respectively.

Instructions:
a) Assume Shannon joins the partnership by investing RM120,000 for a 25%
     interest with bonuses to the existing partners. Prepare the journal entry to
     record his investment.
b) Assume instead that Dobson leaves the partnership. Dobson is paid
     RM180,000 with a bonus to the retiring partner. Prepare the journal entry
     to record Dobson's withdrawal.


Answer 12

 Date            Account Title and Explanation              Ref       Debit            Credit
(a)         Cash                                                      120,000
               Shannon, Capital (25% x 420,000)                                         105,000
               Dobson, Capital (50% x 15,000)                                             7,500
               Lancaster, Capital (30% x 15,000)                                          4,500
               Pender, Capital (20% x 15,000)                                             3,000

          Total capital of existing partnership ..........        RM 300,000
          Investment by Shannon ..........................           120,000
          Total capital of new partnership ...............         RM420,000
          Shannon’s capital credit (25% x 420,000) ......          RM 105,000

          Investment by new partner, Shannon ..........            RM120,000
          Shannon’s capital credit .........................         105,000
          Bonus to old partners .............................       RM15,000


 Date            Account Title and Explanation              Ref       Debit            Credit
(b)         Dobson, Capital                                           150,000
            Lancaster, Capital (3/5 x 30,000)                          18,000
            Pender, Capital (2/5 x 30,000)                             12,000
               Cash                                                                     180,000

          Dobson’s capital balance                                RM 150,000
          Payment by partnership                                    180,000
          Bonus to retiring partner                               RM 30,000




lsy2010
                                                   DFA 5038 (Financial Accounting 3) /Chapter 3


Question 13

The Mago Company at December 31 has cash RM50,000, noncash assets
RM250,000, liabilities RM138,000, and the following capital balances: Gonzalez
RM112,000 and Maldonado RM50,000. The firm is liquidated, and RM275,000 in
cash is received for the noncash assets. Gonzalez and Maldonado income ratios
are 60% and 40%, respectively.
Instructions:
Prepare the entries to record:
(a)    The sale of noncash assets.
(b)    The allocation of the gain or loss on liquidation to the partners.
(c)    Payment of creditors.
(d)    Distribution of cash to the partners.


Answer 13

 Date             Account Title and Explanation        Ref       Debit            Credit
(a)         Cash                                                 275,000
               Noncash Assets                                                      250,000
               Gain on Realization                                                  25,000
(b)         Gain on Realization                                    25,000
               Gonzalez, Capital (60% x 25,000)                                      15,000
               Maldonado, Capital (40% x 25,000)                                     10,000
(c)         Liabilities                                          138,000
               Cash                                                                138,000
(d)         Gonzalez, Capital (112,000 + 15,000)                 127,000
            Maldonado, Capital (50,000 + 10,000)                  60,000
               Cash (50,000 + 275,000 – 138,000)                                   187,000


Question 14

The MFP Partnership is to be liquidated when the ledger shows the following:
          Cash                              RM 50,000
          Noncash Assets                      200,000
          Liabilities                          50,000
          Moss, Capital                        75,000
          Fairly, Capital                     100,000
          Pratt, Capital                       25,000

Moss, Fairly, and Pratt's income ratios are 6:3:1, respectively.

Instructions:
Prepare separate entries to record the liquidation of the partnership assuming
that the noncash assets are sold for RM150,000 in cash.

lsy2010
                                                  DFA 5038 (Financial Accounting 3) /Chapter 3


Answer 14

 Date          Account Title and Explanation          Ref       Debit            Credit
(a)       Cash                                                  150,000
          Loss on Realization                                    50,000
             Noncash Assets                                                       200,000
(b)       Moss, Capital (6/10 x 50,000)                           30,000
          Fairly, Capital (3/10 x 50,000)                         15,000
          Pratt, Capital (1/10 x 50,000)                           5,000
             Loss on Realization                                                    50,000
(c)       Liabilities                                             50,000
             Cash                                                                   50,000
(d)       Moss, Capital (75,000 - 30,000)                         45,000
          Fairly, Capital (100,000 – 15,000)                      85,000
          Pratt, Capital (25,000 - 5,000)                         20,000
             Cash (50,000 + 150,000 – 50,000)                                     150,000


Question 15

Prior to the distribution of cash to the partners, the accounts of ABC Company
are: Cash RM30,000, Ace, Capital (Dr.) RM10,000, Ball, Capital (Cr.) RM25,000,
and Catt, Capital (Cr.) RM15,000. They share income on a 5:3:2 basis.

Instructions:
Prepare entries to record
(a) the absorption of Ace's capital deficiency by the other partners and
(b) the distribution of cash to the partners with credit balances.


Answer 15

 Date           Account Title and Explanation         Ref       Debit            Credit
(a)       Ball, Capital (3/5 x 10,000)                            6,000
          Catt, Capital (2/5 x 10,000)                            4,000
             Ace, Capital                                                           10,000
(b)       Ball, Capital (25,000 – 6,000)                          19,000
          Catt, Capital (15,000 – 4,000)                          11,000
             Cash                                                                   30,000




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