Supplemental Instruction Handouts Financial Accounting Chapter 11: Partnerships Answer Key

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Supplemental Instruction Handouts Financial Accounting Chapter 11: Partnerships Answer Key 1. A. The partners could not agree on a method for sharing income.

1 Supplemental Instruction Handouts Financial Accounting Chapter 11: Partnerships Answer Key 1. A. The partners could not agree on a method for sharing income. A net loss of $30,200 gets divided equally. ($30,200) 2 = ($15,100) each. 1. B. The partners agreed to share incomes and losses in their investment ratio. Neal $52,000 $130,000 = 0.4 x ($30,200) = ($12,080) Sherry $78,000 $130,000 = 0.6 x ($30,200) = ($18,120) Total $130,000 ($30,200) 1. C. The partners agreed to share income by allowing an $85,000 per year salary allowance to Neal, $65,000 per year salary allowance to Sherry, 10% interest on beginning capital balances, and the remainder equally. Neal Sherry Total Net Loss ($30,200) Salary Allowance $85,000 $65,000 ($150,000) Interest Allowance Neal = $52,000 x 0.10 $5,200 Sherry = $78,000 x 0.10 $7,800 ($13,000) Total before dividing equally ($193,200) Divided equally ($193,200) 2 = ($96,600) ($96,600) $193,200 Totals ($6,400) ($23,800) $0 2. A. Smith invests cash of $95,000. $380,000 + $95,000 = $475,000 x 20% = $95,000 Smith s Capital July 1 Cash 95,000 Smith, Capital 95,000

2 2. B. Smith invests cash of $115,000. $380,000 + $115,000 = $495,000 x 20% = $99,000 Smith s Capital $115,000 - $99,000 = $16,000 Reese = $16,000 x 3 4 = $12,000 Steven = $16,000 x 1 4 = $4,000 July 1 Cash 115,000 Smith, Capital 99,000 Reese, Capital 12,000 Steven, Capital 4, C. Smith invests cash of $55,000. $380,000 + $55,000 = $435,000 x 20% = $87,000 $55,000 - $87,000 = ($32,000) Reese = ($32,000) x 3 4 = ($24,000) Steven = ($32,000) x 1 4 = ($8,000) July 1 Cash 55,000 Reese, Capital 24,000 Steven, Capital 8,000 Smith, Capital 87, A. Parker gives his interest in the partnership to his son in law Griffin after Richards and Rogers approve Griffin as a partner. Griffin, Capital 50,000

3 3. B. Parker sells his interest in the partnership to MacFarlane after Richards and Rogers approve MacFarlane as a partner. Parker received $75,000 from the sale. MacFarlane, Capital 50, C. Parker is paid $50,000. Cash 50, D. Parker is paid $60,000. $50,000 - $60,000 = ($10,000) Richards = ($10,000) x 3 5 = ($6,000) Rogers = ($10,000) x 2 5 = ($4,000) Richards, Capital 6,000 Rogers, Capital 4,000 Cash 60,000

4 3. E. Parker is given an automobile (originally costing $22,500 with accumulated depreciation of $12,500) and cash of $35,000. Book Value of Automobile = $22,500 - $12,500 = $10,000 Assets received by Parker = $10,000 (automobile) + $35,000 (cash) = $45,000 $45,000 - $50,000 = ($5,000) (loss to Parker) Richards = ($5,000) x 3/5 = ($3,000) Rogers = ($5,000) x 2/5 = ($2,000) Oct. 31 Parker, Capital 50,000 Accumulated Depreciation - Automobile 12,500 Richards, Capital 3,000 Rogers, Capital 2,000 Cash 35,000 Automobile 22, Prepare all the necessary general journal entries to liquidate the partnership if the assets were sold for: A. $180,000. Dec 31 Cash 180,000 Accumulated Depreciation Machinery 324,000 Gain on sale of machinery 4,000 Machinery 500,000 Dec 31 Gain on sale of machinery 4,000 King, Capital (4,000 x 1 8) 500 Queen, Capital (4,000 x 3 8) 1,500 Baron, Capital (4,000 x 4 8) 2,000 Dec 31 Accounts Payable 50,000 Notes Payable 150,000 Cash 200,000 Dec 31 King, Capital (8, ) 8,500 Queen, Capital (10, ,500) 11,500 Baron, Capital (20, ,000) 22,000 Cash 42,000

5 4. Prepare all the necessary general journal entries to liquidate the partnership if the assets were sold on December 31 for: B. $168,000. Dec 31 Cash 168,000 Accumulated Depreciation Machinery 324,000 Loss on sale of Machinery 8,000 Machinery 500,000 Dec 31 King, Capital (8,000 x 1 8) 1,000 Queen, Capital (8,000 x 3 8) 3,000 Baron, Capital (8,000 x 4 8) 4,000 Loss on sale of machinery 8,000 Dec 31 Accounts Payable 50,000 Notes Payable 150,000 Cash 200,000 Dec 31 King, Capital (8,000-1,000) 7,000 Queen, Capital (10,000-3,000) 7,000 Baron, Capital (20,000-4,000) 16,000 Cash 30,000

Chapter Thirteen In class practice

Problem 13.1 Chapter Thirteen In class practice Uzi Company received a charter granting the right to issue 200,000 shares of $1 par value common stock and 10,000 shares of 8% cumulative and nonparticipating,