29 Jun accounting !
| Exercise 1 – Partnership Profit Allocation | |||||
| The WhyEyeOughta general partnership is comprised of three general partners; Mo, Larry, & Curley. The partnership | |||||
| agreement calls for profits of the partnership to be allocated as per the following: | |||||
| Capital balances for each partner as of December 31st, 2017 are as follows: | |||||
| Mo | $400,000 | Larry | $500,000 | Curley | $350,000 |
| The partnership agreement calls for the following distribution of profit (or loss): | |||||
| A) If there is a profit, each partner is to receive 5% interest on their capital balance at year-end in excess of $450,000 | |||||
| B) Mo & Larry are to receive salaries of $50,000 each; Curley is to receive a salary of $75,000 if there is a profit | |||||
| C) Larry is to receive a bonus of 10% of partnership profit if there is a profit | |||||
| D) Any remaining profit or loss is to be allocated to Mo, Larry, & Curley in the ratio of 2:1:2 respectively | |||||
| Complete the below distribution of income schedule for the partnership if there was a 2017 net income of $500,000 by entering the required figures in the gray shaded cells. When correct, the cells will change color. If a cell is not to have a figure in it, enter the word “zero” in it. | |||||
| Mo | Larry | Curley | Total | ||
| Interest on Capital | |||||
| Salaries | |||||
| Bonus | |||||
| Sub-Total | |||||
| Remainder to be Allocated | |||||
| Total | |||||
| Complete the below distribution of income schedule for the partnership if there was a 2017 net loss of <$50,000> by entering the required figures in the gray shaded cells. When correct, the cells will change color. If a cell is not to have a figure in it, enter the word “zero” in it. | |||||
| Mo | Larry | Curley | Total | ||
| Interest on Capital | |||||
| Salaries | |||||
| Bonus | |||||
| Sub-Total | |||||
| Remainder to be Allocated | |||||
| Total |
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Ex 2 New Partner
| Exercise 2 – Accounting for a New Partner | ||
| OTC Partnership has three existing partners with capital accounts and profit splits as follows: | ||
| Partner | Capital Balance | Profit Interest |
| A | $500,000 | 20% |
| B | 1,500,000 | 30% |
| C | 1,000,000 | 50% |
| $3,000,000 | 100% | |
| If OTC admits a new partner, under each of the following scenarios how is the entry booked? | ||
| Scenario 1: New Partner D contributes $3,000,000 for a 50% capital share of the firm. | ||
| $3,000,000 / 50% implies a FMV of $6,000,000 | ||
| Total new capital = $3,000,000 + $3,000,000 = $6,000,000 | ||
| Account | D | C |
| Assets (contributed by D) | ||
| Capital – D | ||
| Scenario 2: New Partner D contributes $4,000,000 for a 50% capital share of the firm. The firm | ||
| uses the bonus method of accounting for new partners. | ||
| $4,000,000 / 50% implies a FMV of $8,000,000 | ||
| Total new capital = $3,000,000 + $4,000,000 = $7,000,000 | ||
| New Partner Capital Balance = (BV Original + New Contribution) x New Partner % | ||
| New Partner Capital Balance = ($3,000,000 + $4,000,000) x 50% | ||
| New Partner Capital Balance = $7,000,000 x 50% = $3,500,000 | ||
| Account | D | C |
| Assets (contributed by D) | ||
| Capital – A | ||
| Capital – B | ||
| Capital – C | ||
| Capital – D | ||
| Scenario 3: New Partner D contributes $4,000,000 for a 50% capital share of the firm. The firm uses | ||
| the goodwill method, and any excess over FMV is attributable to existing goodwill. | ||
| $4,000,000 / 50% implies a FMV of $8,000,000 | ||
| Total new contributed capital = $3,000,000 + $4,000,000 = $7,000,000 | ||
| $1,000,000 difference = Goodwill | ||
| Total New Capital = $3,000,000 + $4,000,000 + $1,000,000 = $8,000,000 | ||
| Account | D | C |
| Assets (contributed by D) | ||
| Goodwill | ||
| Capital – A | ||
| Capital – B | ||
| Capital – C | ||
| Capital – D | ||
| Scenario 4: New Partner D contributes $500,000 for 25% share of the firm. The firm uses the bonus | ||
| method, and any bonus is attributable to the new partner. | ||
| $500,000 / 25% implies a FMV of $2,000,000 | ||
| Total new capital = $3,000,000 + $500,000 = $3,500,000 | ||
| New Partner Capital Balance = (BV Original + New Contribution) x New Partner % | ||
| New Partner Capital Balance = ($3,000,000 + $500,000) x 25% | ||
| New Partner Capital Balance = $3,500,000 x 25% = $875,000 | ||
| Account | D | C |
| Assets (contributed by D) | ||
| Capital – A | ||
| Capital – B | ||
| Capital – C | ||
| Capital – D |
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Ex 3 Rodgers CPA Review
| Exercise 3: Rodgers CPA Review “Interactive Practice Quiz” |
| As part of your registration for this course, each student is given access to the Rodgers CPA Review website, a great resource for both lecture material and review / expectation of the actual CPA exam. For our course, we’re going to be utilizing Rodgers’ “Interactive Practice Quizzes”. The “Interactive Practice Quizzes” are a great resource for developing an understanding of the material at hand – they are not intended to be assessments. When taking an “Interactive Practice Quiz” you have the ability to draw from resources on the website to develop an understanding of the material in order to answer the questions. |
| In certain sections of our class, you’re going to be asked to answer the multiple choice questions within specific sections of Rodgers CPA Review “Interactive Practice Quizzes”. Below will be specific instructions on which area to work on, and what you need to complete and post up on this page to demonstrate your participation in these activities. |
| In week #6 of this class we’ll be covering legal reorganization & bankruptcy and partnerships, which align to the REG 20 and FAR 28 sections in Rodgers CPA Review, respectively. There are “Interactive Practice Quizzes” for REG 20 and FAR 28 which contains approximately 50 and 20 questions respectively. For week #6, you’ll be working through these “Interactive Practice Quizzes”. |
| For week #6, you will be required to have attempted at least 20 questions in each of the FAR practice quizzes of the multiple choice questions in the REG 21 and FAR 28 “Interactive Practice Quizzes” and successfully answer at least 15 in each one (more are always welcome!). |
| To complete this week’s requirement, attempt at least 20 questions in each FAR with at least 15 correct responses each, and then take screen shots of your completion summaries for each section. Insert the screen shots below and simply submit with this file when uploaded this completed homework assignment. |
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