Question 1 - Bob Freeley and Jack Hart form a partnership, investing $25,000 and $100,000, respectively.
Requirement
1. Determine their shares to the net income or net loss for each of the following independent situations:
a. Net loss is $130,000 and the partners have no written partnership agreement.
b. Net income is $50,000, and the partnership agreement states that the partners share profits and losses on the basis of their capital balances.
c. Net income is $140,000. The first $84,000 is shared on the basis of partner capital balances. The next $42,000 is based on partner service, with Freeley getting 25% and hart 75%. The remainder is shared equally.
Question 2 - Hayley Hollis is admitted to the partnership of Rose & Novak. Prior to her admission, the partnership books show Greta Rose's capital balance at $170,000 and Chris Novak's at $85,000.
Requirements
1. Compute each partner's equity on the books of the new partnership under the following plans:
a. Hollis pays $95,000 for Novak's equity. Hollis pays Novak directly.
b. Hollis invests $85,000 to acquire a ¼ interest in the partnership.
c. Hollis invest $105,000 to acquire a ¼ interest in the partnership.
2. Journalize the entries for admitting the new partner under plans a, b, and c.
Question 3 - Robbie, Scott, and Van are liquidating their partnership. Before selling the assets and paying the liabilities, the capital balances are $41,000: Scott, $31,000; and van, $20,000. The partnership agreement is silent on the division of profits and losses.
1. After selling the assets and paying the liabilities, the partnership has cash of $92,000. How much cash will each partner receive in the final liquidation?
2. After selling the assets and paying the liabilities, the partnership has cash of $80,000. How much cash will each partner receive in the final liquidation?
Question 4 - Effect of stock dividends, stock splits, and treasury stock transactions. Many types of transactions may affect stockholders' equity.
Requirement
1. Identify the effects of the following transaction on total stockholder's equity. Each transaction is independent.
a. A 10% stock dividend. Before the dividend, 52,000 shares of 41par common stock were outstanding; market value was $3 at the time of the dividend.
b. A 2-for1 stock split. Prior to the split, 65,000 shares of $4 par common stock were outstanding.
c. Purchase of 1,000 shares of treasury stock (par value at $0.50) at $3 per share.
d. Sale of 900 shares of $0.50 par treasury stock for $5 per share. Cost of the treasury stock was $3 per share.
Question 5 - On May 1, 2012, Noah Unlimited issues 9%, 20-year bonds payable with a maturity value of $20,000. The bonds sell at 103 and pay interest on May 1 and November 1. Noah Unlimited amortizes bond premium by the straight-line method.
Requirements
1. Journal the issuance of the bonds on May 1, 2012.
2. Journalize the semiannual interest payment and amortization of bond premium on November 1, 2012.
3. Journalize the interest accrual needed on December 31, 2012.
4. Journalize the interest payment on May 1, 2013.
Question 6 - Clark issued $50,000 of 10-year, 9% bonds payable on January 1, 2012. Clark pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line method. The company can issue its bonds payable under various conditions.
Requirements
1. Journalize Clark's issuance of the bonds and first semiannual interest payment assuming the bonds were issued at par value. Explanations are not required.
2. Journalize Clark's issuance of the bonds and first semiannual interest payment assuming the bonds were issued at price of 95. Explanations are not required.
3. Journalize Clark's issuance of the bonds and first semiannual interest payment assuming the bonds were issued at price of 106. Explanations are not required.
4. Which bond price results in the most interest expense for Clark? Explain in detail.
Question 7 - At Dec. 31, MediSharp Precision Instruments owes $50,000 on accounts payable, salary payable of $16,000, and income tax payable of $8,000. MediSharp also has $280,000 of bonds payable that were issued at face value that require payment of $35,000 installments next year and the remainder in later years. The bonds payable require an annual interest payment of $4,000, and MediSharp still owes this interest for the current year.
Requirement
1. Report MediSharp's liabilities on its classified balance sheet. List the current liabilities in descending order (largest first, and so on), and show the total of current liabilities.