1.) Recording Partner's Original Investment
Gwen Delk and Alliesha Johnson decide to form a partnership by combining the assets of their separate businesses. Delk contributes the following assets to the partnership: cash, $15,120; accounts receivable with a face amount of $158,760 and an allowance for doubtful accounts of $5,730; merchandise inventory with a cost of $91,270; and equipment with a cost of $175,720 and accumulated depreciation of $114,220.
The partners agree that $6,990 of the accounts receivable are completely worthless and are not to be accepted by the partnership, that $11,910 is a reasonable allowance for the uncollectibility of the remaining accounts, that the merchandise inventory is to be recorded at the current market price of $85,790, and that the equipment is to be valued at $77,490.
Journalize the partnership's entry to record Delk's investment. For a compound transaction, if an amount box does not require an entry, leave it blank.
2.) Dividing Partnership Income
Candace Hassell and Abby Lawson formed a partnership, investing $432,000 and $144,000, respectively.
Determine their participation in the year's net income of $342,000 under each of the following independent assumptions:
No agreement concerning division of net income.
Divided in the ratio of original capital investment.
Interest at the rate of 12% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $91,000 and $125,000, respectively, and the balance divided equally.
Allowance of interest at the rate of 12% on original investments, salary allowances of $91,000 and $125,000, respectively, and the remainder divided equally.
3.) Dividing Partnership Income
Candace Hassell and Abby Lawson formed a partnership, investing $417,600 and $278,400, respectively.
Determine their participation in the year's net income of $330,000, under each of the following independent assumptions.
No agreement concerning division of net income.
Divided in the ratio of original capital investment.
Interest at the rate of 18% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $111,000 and $153,000, respectively, and the balance divided equally.
Allowance of interest at the rate of 18% on original investments, salary allowances of $111,000 and $153,000, respectively, and the remainder divided equally.
4.) LLC Net Income and Statement of Members' Equity
Intermedia, LLC, has three members: WYXT Partners, Lindsey Wilson, and Daily Sun Newspaper, LLC. On January 1, 2014, the three members had equity of $275,000, $70,000, and $165,000, respectively. WYXT Partners contributed an additional $70,000 to Intermedia, LLC, on June 1, 2014. Lindsey Wilson received an annual salary allowance of $159,500 during 2014. The members' equity accounts are also credited with 18% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 4:3:3 among the three members. The net income for Intermedia, LLC, for 2014 was $530,000. Amounts equal to the salary and interest allowances were withdrawn by the members.
a. Determine the division of income among the three members. If an amount box does not require an entry, leave it blank.
b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, if an amount box does not require an entry, leave it blank.
5.) Partner Income and Withdrawal Journal Entries
The notes to the annual report for Patrick Company indicated the following policies regarding the partners' capital:
The allocation of profits to those who were partners during the financial year occurs following the finalization of the annual financial statements. During the year, partners receive monthly drawings and, from time to time, additional profit distributions. Both the monthly drawings and profit distributions represent payments on account of current-year profits and are reclaimable from partners until profits have been allocated.
Assume that the partners draw $60,000 per month for 2014 and the net income for the year is $800,000. Journalize the partner capital and partner drawing control accounts in the following requirements:
a. Provide the journal entry for the monthly partner drawing for January.
b. Provide the journal entry to close the income summary account at the end of the year.
c. Provide the journal entry to close the drawing account at the end of the year.
6.) Admitting New Partners
Lia Wu and Becca Sims are partners who share in the income equally and have capital balances of $222,000 and $93,000, respectively. Wu, with the consent of Sims, sells one-third of her interest to Kara Oliver.
a. What entry is required by the partnership if the sales price is $60,000?
b. What entry is required by the partnership if the sales price is $90,000?
7.) Distribution of Cash Upon Liquidation
Pryor and Lester are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $12,000 and $8,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $15,000.
a. What is the amount of a gain or loss on realization?
b. How should the gain or loss be divided between Pryor and Lester?
c. How should the cash be divided between Pryor and Lester? If an amount is zero, enter "0".