28 Jul QUESTION 1NEWLAND AND PALERMO FORM A PARTNERSHIP
Question 1Newland and Palermo form a partnership. Newland contributes land with a book value of $50,000 anda fair value of $60,000. Newland also contributes equipment with a book value of $52,000 and a fairvalue of $57,000. The partnership assumes a $20,000 mortgage on the land. What should be thebalance in Newlands capital account upon formation of the partnership?$Newland CapitalAccount Question 2M. Elston and R. Ogle have partnership capital balances of $40,000 and $80,000, respectively. Thepartnership agreement indicates that net income or net loss should be shared equally. If net income forthe partnership is $42,000, how should the net income be divided?The net income should be divided as $to M. Elston and $to R. Ogle. Question 3Barbara Ripley and Fred Nichols decide to organize the ALL-Star partnership. Ripley invests$84,000 cash, and Nichols contributes $56,000 cash and equipment having a book value of $19,600.Prepare the entry to record Nicholss investment in the partnership, assuming the equipment has a fairvalue of $28,000. (Credit account titles are automatically indented when amount is entered.Do not indent manually.)Account Titles andExplanation Debit Credit Question 4PFW Co. reports net income of $57,000. Partner salary allowances are Pitts $17,000, Filbert $4,000,and Witten $5,400. Indicate the division of net income to each partner, assuming the income ratiois 50 : 20 : 30, respectively.Division of Net Income Pitts Filbert Witten Total $ $ $ $ $ $ $ $ Salary allowance Remaining income Total division of net income Question 5K. Decker, S. Rosen, and E. Toso are forming a partnership. Decker is transferring $48,120 of personalcash to the partnership. Rosen owns land worth $15,270 and a small building worth $75,970, whichshe transfers to the partnership. Toso transfers to the partnership cash of $12,470, accounts receivableof $33,290 and equipment worth $23,750. The partnership expects to collect $29,961 of the accountsreceivable.Prepare the journal entries to record each of the partners investments. (Credit account titles areautomatically indented when amount is entered. Do not indent manually.)Account Titles and Explanation (To record investment of Decker.) (To record investment of Rosen.) Debit Credit (To record investment of Toso.)What amount would be reported as total owners equity immediately after the investments?$Total owners equity Question 6The post-closing trial balances of two proprietorships on January 1, 2017, are presented below.Sorensen CompanyDr.CashAccounts receivable Cr. $15,000 Dr.28,000 $3,200 Inventory 28,500 Equipment 49,000 Cr. $13,000 19,000 Allowance for doubtful accounts Lucas Company $4,80019,90031,000 Accumulated depreciationequipment 25,900 11,900 Notes payable 19,400 16,200 Accounts payable 23,800 33,500 Sorensen, capital 39,200 Lucas, capital 25,500$111,500 $111,500 $91,900 $91,900 Sorensen and Lucas decide to form a partnership, Solu Company, with the following agreed uponvaluations for noncash assets.Sorensen CompanyAccounts receivableAllowance for doubtful accountsInventoryEquipment $19,0004,90030,20027,000 Lucas Company$28,0004,30021,60016,200 All cash will be transferred to the partnership, and the partnership will assume all the liabilities of the two proprietorships. Further, it is agreed that Sorensen will invest an additional $5,400 in cash, andLucas will invest an additional $20,500 in cash.Prepare separate journal entries to record the transfer of each proprietorships assets and liabilities tothe partnership. (Credit account titles are automatically indented when amount is entered.Do not indent manually.)Date Account Titles and ExplanationJan. 1 (Transfer of Sorensen’s assets andliabilities.)Jan. 1 Debit Credit (Transfer of Lucas’ assets and liabilities.)Journalize the additional cash investment by each partner. (Credit account titles are automaticallyindented when amount is entered. Do not indent manually.)No. Account Titles and Explanation Debit Credit Jan. 1 (To record Sorensen’s investment.)Jan. 1 (To record Lucas’ investment.)Prepare a classified balance sheet for the partnership on January 1, 2017. (List Current Assets inorder of liquidity.)SOLU COMPANYBalance SheetJ anuary 1, 2017 Assets $ $ : $ Liabilities and Owners Equity $ $ $ Question 7At the end of its first year of operations on December 31, 2017, NBS Companys accounts show thefollowing.PartnerArt NienstedGreg BolenKrista Sayler Drawings$22,60013,80010,200 Capital$42,10035,50025,000 The capital balance represents each partners initial capital investment. Therefore, net income or netloss for 2017 has not been closed to the partners capital accounts. Journalize the entry to record the division of net income for the year 2017 under each of the followingindependent assumptions. (Credit account titles are automatically indented when amount isentered. Do not indent manually.)(1) Net income is $29,800. Income is shared 6 : 3 : 1.(2) Net income is $40,200. Niensted and Bolen are given salary allowances of $14,800 and $10,400,respectively. The remainder is shared equally.(3) Net income is $18,000. Each partner is allowed interest of 10% on beginning capital balances.Niensted is given a $13,740 salary allowance. The remainder is shared equally.No Account Titles and.Explanation Debit Credit 1. 2. 3. Prepare a schedule showing the division of net income under assumption (3) above. (If an amountreduces the account balance then enter with a negative sign preceding the number e.g.-15,000 or parenthesis e.g. (15,000).)DIVISION OF NET INCOMEArt Niensted Greg Bolen Krista Sayler Total $ $ Salary allowance Interest allowance oncapitalTotal salaries and interest Remaining deficiency$ $ $ $ Total division of net incomePrepare a partners capital statement for the year under assumption (3) above. (List items thatincrease partners capital first.)NBS COMPANYPartners Capital Statement Art Niensted Greg Bolen Krista Sayler Total $ $ $ $ $ $ $ $ : : Question 8At April 30, partners capital balances in PDL Company are G. Donley $55,000, C. Lamar $45,000, andJ. Pinkston $17,600. The income sharing ratios are 5 : 4 : 1, respectively. On May 1, the PDLT Companyis formed by admitting J. Terrell to the firm as a partner. Journalize the admission of Terrell under each of the following independent assumptions. (Creditaccount titles are automatically indented when amount is entered. Do not indent manually.Round answers to 0 decimal places, e.g. 5,275.)(1)(2)(3)(4) TerrellTerrellTerrellTerrell purchases 50% of Pinkstons ownership interest by paying Pinkston $15,000 in cash.purchases 331/3% of Lamars ownership interest by paying Lamar $15,000 in cash.invests $62,800 for a 30% ownership interest, and bonuses are given to the old partners.invests $44,600 for a 30% ownership interest, which includes a bonus to the new partner. No Account Titles and.Explanation1. 2. 3. 4. Debit Credit Lamars capital balance is $33,200 after admitting Terrell to the partnership by investment. If Lamarsownership interest is 20% of total partnership capital, what were (1) Terrells cash investment and (2)the bonus to the new partner?$(1) Terrells cash investment$(2) Bonus to new partner Question 9On December 31, the capital balances and income ratios in TEP Company are as follows.PartnerTrayerEmig Capital Balance Income Ratio $60,000 50% 41,500 30% Posada29,00020%Journalize the withdrawal of Posada under each of the following assumptions. (Credit account titlesare automatically indented when amount is entered. Do not indent manually.)(1) Each of the continuing partners agrees to pay $18,800 in cash from personal funds to purchasePosadas ownership equity. Each receives 50% of Posadas equity.(2) Emig agrees to purchase Posadas ownership interest for $23,000 cash.(3) Posada is paid $32,920 from partnership assets, which includes a bonus to the retiring partner.Posada is paid $19,800 from partnership assets, and bonuses to the remaining partners are(4)recognized.No Account Titles and.Explanation1. 2. 3. Debit Credit 4. If Emigs capital balance after Posadas withdrawal is $44,890, what were (1) the total bonus to theremaining partners and (2) the cash paid by the partnership to Posada?$(1) Total bonus$(2) Cash paid to Posada
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