a/d equipment 1,000,000 liabilities

29 Jun a/d equipment 1,000,000 liabilities

Question
Problem A

1) The ABC Partnership has 3 equal partners with the following capital accounts:

a. Partner A capital account $100,000

b. Partner B capital account $100,000

c. Partner C capital account $100,000

They are allowing Partner D to become an equal (1/4) partner for a contribution of $300,000

a) Prepare the journal entry if the partnership uses the bonus method

b) Prepare the journal entry if the partnership uses the goodwill method

2) Alpha and Beta are equal partners. At the beginning of the year Alpha has $600,000 in his capital account while Beta has $900,000 in her partnership account. The partnership agreement states that partners get 10% interest on their capital accounts and that Alpha gets a $40,000 salary for work done for the partnership. Any remaining profits or losses are equally divided between the partners. Income before interest and Alpha’s salary was $375,000. Determine the ending capital balance for Alpha and Beta.

Problem B

1) On January 1, 2011 The ACME Company made two investments:

a. Purchased 2000 of the 2,000,000 shares of HAL for $200,000.

b. Purchased 400 of the 1000 shares of GZK for $40,000 at this time the book value of GZK was $100,000.

In 2011 HAL paid dividends of $4,000,000, reported income of $12,000,000. On December 31, HAL stock was selling for $104 per share.

In 2011 GZK paid dividends of $8000, reported income of $2800. On December 31, GZK stock was selling for $98 per share.

On 3/1/12 ACME sold its investment in HAL at $102 per share

On 3/14/12 ACME sold its investment in GZK at $101 per share

REQUIRED:

Prepare the journal entries needed by ACME in 2011 and 2012 if…. They have no influence over HAL and they have significant influence of GZK

Note: ACME is a manufacturer so they would use available for sale rather than trading securities.

2) On January 1, 2011 Big Company purchased 80% of Small company for $3,000,000. On January 1, Small had the following balance sheet

Assets

Cash 500,000

Inventory 500,000

Equipment 2,000,000

a/d equipment 1,000,000

liabilities

accounts payable 200,000

equity

common stock 1,000,000

retained earnings 800,000

The equipment with a 10 year life (no salvage) has a fair market value of $1,600,000

On January 1, 2011 (just before the purchase) Big had the following balance sheet:

Cash $4,000,000

Equipment $5,000,000

a/d equipment $3,000,000

land $3,000,000

a/p 1,000,000

common stock 1,000,000

r/e 7,000,000

REQUIRED: PREPARE THE CONSOLIDATED BALANCE SHEET ON JANUARY 2, 2011

Problem C

1) On January 1, 2005 Able Company purchased all of the stock of Baker Company. On January 1, 2010, Able purchased a piece of equipment for $100,000. This equipment is expected to last 8 years with $4000 salvage. On January 1, 2011 Able sold the equipment to Baker for $80,000. Baker believes the equipment has 7 remaining years and a 3000 salvage. On January 1, 2013 Baker sold the equipment to Cat company for $45,000.

REQUIRED: PREPARE THE JOURNAL ENTRIES FOR ABLE, BAKER AND CONSOLIDATED FOR 2011, 2012, AND 2013…LABEL WHOSE BOOKS THE ENTRIES ARE BEING MADE ON

3) On 1/1/2000 Crazy Company purchased all the outstanding stock of Normal Company. On 10/1/2011 Crazy sold inventory to Normal for $60,000. This merchandise had cost Crazy $20,000 to produce. At the end of 2011 Normal had sold ½ of the merchandise from Crazy for $42,000. In 2012 Normal sold the rest of the merchandise from Crazy for $43,000.

REQUIRED: PREPARE THE JOURNAL ENTRIES FOR CRAZY, NORMAL AND WORKSHEET FOR 2011, 2012…BOTH CRAZY AND NORMAL USE PERPETUAL INVENTORY.

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