1. Dracula and Frankenstein were partners with capital balances of $ 2,600 and $ 1,950, respectively, and an income sharing ratio of 3:2. They admitted Wolfman with a 30% interest in the partnership. Goodwill of $ 350 was recorded and credited to the original partners. How much cash was contributed by Wolfman?
2. Maksy, Derstine, and Wagaman have the following capital balances, respectively: $ 85,000, $ 110,000, and $ 160,000. The partners share profits and losses 30%, 20%, and 50% respectively. Derstine retires and is paid $ 155,000 based on an independent appraisal of the business.
a. If the bonus method is used, what are the capital balances of the remaining partners?
b. If the goodwill method is used, how much of goodwill is credited to Maksy?
3. Pooh, Tigger and Eeyore are thinking of starting a partnership with the following profit and loss allocation:
• Interest of 9% on the weighted-average net capital in excess of $ 20,000. All partners are required to maintain a minimum of $ 20,000 in their net capital accounts throughout the year. Net capital is defined in the partnership agreement as capital balances less drawing account balances;
• Salaries of $ 45,000 and $ 35,000 to Pooh and Tigger, respectively;
• Eeyore will receive a bonus of 8% of sales in excess of $ 300,000;
• Profit and loss percentages will be 40%, 40% and 20% for Pooh, Tigger and Eeyore, respectively.
Presume for 2015, Pooh, Tigger and Eeyore will maintain weighted-average net capital balances of $ 95,000, $ 70,000 and $ 130,000, respectively. Presume that 2015 sales will be $ 850,000. Determine how much 2015 partnership profit would have to be realized for Pooh to be allocated $ 85,000.
4. The current balance sheet for a liquidating partnership follows:
|
Cash
|
39,000
|
Liabilities
|
64,000
|
|
Noncash Assets
|
198,000
|
L, Loan
|
11,000
|
|
|
|
K, Capital
|
53,000
|
|
|
|
L, Capital
|
47,000
|
|
|
|
M, Capital
|
62,000
|
The partners share profit/losses 40/26/34. Liquidation expenses are estimated to be $ 12,000.
a. Prepare a predistribution plan as a guide for the distribution of cash.
b. For how much must the noncash assets be sold for M to receive a minimum of his current capital balance?
5. The current balance sheet for the BROC partnership follows:
|
Cash
|
23,000
|
Liabilities
|
105,000
|
|
Accounts Receivable
|
104,000
|
O, loan
|
18,000
|
|
Inventory
|
97,000
|
B, Capital
|
116,000
|
|
Land
|
86,000
|
R, Capital
|
91,000
|
|
Plant & Equip, net
|
171,000
|
O, Capital
|
74,000
|
|
|
|
C, Capital
|
77.000
|
|
|
481,000
|
|
481,000
|
Profits/losses are allocated 30/15/20/35, respectively. The partners have decided to terminate operations and liquidate the business. Anticipated liquidation expenses are estimated to be $ 14,000. The following transactions occurred during liquidation:
a. Collected 70% of the accounts receivable and wrote off the balance as uncollectible.
b. All of the Land. Plant & Equip was sold for $ 115,000
c. Distributed safe capital balances.
d. Partner C has become personally insolvent.
e. Paid liabilities.
f. All of the inventory was sold for $ 23,000.
g. Distributed safe capital balances.
h. Paid liquidation expenses of $ 11,000.
i. Made final cash disbursements. Presume that all partners except C are personally solvent.
a. Prepare a liquidation worksheet Note that there are 2 safe payments, so prepare 2 safe payment schedules.
b. Prepare all required journal entries in proper journal format.