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This is the assignment key chapter 12
Typology: Assignments
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Distributed to Hutchins: Hutchins Jenkins Total Annual salary................................................... $ 24,000 $ — $ 24, Interest............................................................. 7,200^1 9,600^2 16, Deduct excess of allowances over income.. (3,200)^3 (1,600)^4 (4,800) Total distributed to Hutchins......................... $ 28,000 $ 8,000 $ 36, (^1) $60,000 × 12% (^2) $80,000 × 12% (^3) ($36,000 – $24,000 – $16,800) × 2/ (^4) ($36,000 – $24,000 – $16,800) × 1/
a. Equipment.................................................................... 12, Jordon Garmon, Capital........................................ 8, Kali Miller, Capital.................................................. 4, b. Cash.............................................................................. 64, Brandon Tarr, Capital............................................ 64,
a. Land.............................................................................. 16, Weston Perry, Capital............................................ 8, Drew Akins, Capital............................................... 8, b. Drew Yancy, Capital.................................................... 16, Jamarcus Webster, Capital................................... 16,500* *($25,000 + $8,000) × 50%
Equity of Maples................................................................................ $ 65, Baker contribution............................................................................ 25, Total equity after admitting Baker................................................... $ 90, Baker’s equity interest...................................................................... × 30% Baker’s equity after admission........................................................ $ 27, Baker’s contribution......................................................................... 25, Bonus paid to Baker......................................................................... $ 2,
Equity of Amory................................................................................. $ 340, Perez’s contribution.......................................................................... 550, Total equity after admitting Perez................................................... $ 890, Perez’s equity interest...................................................................... × 60% Perez’s equity after admission........................................................ $ 534, Perez’s contribution.......................................................................... $ 550, Perez’s equity after admission........................................................ 534, Bonus paid to Amory........................................................................ $ 16,
Penn’s equity prior to liquidation......................................... $160, Realization of asset sales...................................................... $250, Book value of assets ($160,000 + $100,000 + $15,000)...... 275, Loss on liquidation................................................................ $ 25, Penn’s share of loss (50% × $25,000).................................. (12,500) Penn’s cash distribution....................................................... $147,
Myers’s equity prior to liquidation....................................... $22, Realization of asset sales...................................................... $65, Book value of assets ($22,000 + $30,000 + $6,000)............ 58, Gain on liquidation................................................................. $ 7, Myers’s share of gain (50% × $7,000)................................... 3, Myers’s cash distribution...................................................... $25,
a. Min’s equity prior to liquidation...................................... $ 120, Realization of asset sales................................................ $ 60, Book value of assets........................................................ 320,000* Loss on liquidation........................................................... $260, Min’s share of loss (50% × $260,000)............................. (130,000) Min’s deficiency................................................................ $ (10,000) *$120,000 + $200, b. $60,000. $200,000 – $130,000 share of loss – $10,000 Min deficiency, also equals the amount realized from asset sales.
Details
The partners can divide net income in any ratio that they wish. However, in the absence of an agreement, net income is divided equally between the partners. Therefore, Jasmine’s conclusion was correct, but for the wrong reasons. In addition, note that the monthly drawings have no impact on the division of income.
a. Net income: $188, Bowman Mapes Total Salary allowance............................................. $ 75,000 $60,000 $135, Remaining income.......................................... 31,800 21,2 00 53 , Net income....................................................... $106,800 $81,200 $188, Bowman remaining income: ($188,000 – $135,000) × 3/ Mapes remaining income: ($188,000 – $135,000) × 2/ b. (1) Income Summary.................................................................. 188, B. Bowman, Member Equity........................................... 106, S. Mapes, Member Equity............................................... 81, (2) B. Bowman, Member Equity................................................ 75, S. Mapes, Member Equity.................................................... 60, B. Bowman, Drawing....................................................... 75, S. Mapes, Drawing........................................................... 60, Note: The reduction in members’ equity from withdrawals would be disclosed on the statement of members’ equity but does not affect the allocation of net income in part (a) of this exercise.
a. Daily Sun WYXT Lindsey Newspaper, Partners Wilson LLC Total Salary allowance....................... $115,600 $115, Interest allowance..................... $ 24,000^1 6,0 002 $ 14,400^3 44,4 00 Remaining income (4:3:3)........ 196 ,000 147,000 147,000 490 , Net income................................. $220,000 $268,600 $161,400 $650, (^1) 12% × $200, (^2) 12% × $50, (^3) 12% × $120, b. Dec. 31, 2010 Income Summary.............................................. 650, WYXT Partners, Member Equity................ 220, Lindsey Wilson, Member Equity................ 268, Daily Sun Newspaper, LLC, Member Equity...................................................... 161, Dec. 31, 2010 WYXT Partners, Member Equity...................... 24, Lindsey Wilson, Member Equity..................... 121, Daily Sun Newspaper, LLC, Member Equity 14, WYXT Partners, Drawing............................ 24, Lindsey Wilson, Drawing........................... 121, Daily Sun Newspaper, LLC, Drawing........ 14, c. INTERMEDIA, LLC Statement of Members’ Equity For the Year Ended December 31, 2010 Daily Sun WYXT Lindsey Newspaper, Partners Wilson LLC Total Members’ equity, January 1, 2010......... $200,000 $ 50,000 $120,000 $ 370, Additional investment during the year 50,000 50, $250,000 $ 50,000 $120,000 $ 420, Net income for the year.......................... 220,0 00 268,600 161,400 650 ,
a. Jan. 31 Partner, Drawing.................................. 30,000, Cash................................................. 30,000, b. Dec. 31 Income Summary................................. 400,000, Partner, Capital............................... 400,000, c. Dec. 31 Partner, Capital..................................... 360,000,000* Partner, Drawing............................. 360,000, *12 months × £30 million
a. and b. Lia Wu, Capital................................................................ 50, Kara Oliver, Capital.................................................... 50, $150,000 × 1/ Note: The sale to Oliver is not a transaction of the partnership; so, the sales price is not considered in this journal entry.
a. $1,922,000 ($940,000,000/489), rounded b. $400,000 ($195,600,000/489) c. A new partner might contribute more than $400,000 because of goodwill attributable to the firm’s reputation, future income potential, and a strong client base, etc.
The bonus to Harris is debited equally between Taylor’s and Garcia’s The bonus to Taylor and Garcia is credited equally between Taylor’s and
Statement of Partnership Equity For the Year Ended December 31, 2010 Total Jen Teresa Jaime Partner- Wilson, McDonald, Holden, ship Capital Capital Capital Capital Partnership capital, January 1, 2010......... $ 45,000 $ 55,000 $100, Admission of Jaime Holden....................... — — $ 25 ,000 25, Salary allowance......................................... 30 ,000 30 , Remaining income...................................... 46,8 00 57,2 00 26 ,000 130, Less: Partner withdrawals......................... (38,400) (28,600) (13,000) (80,000) Partnership capital, December 31, 2010... $ 83,400 $ 83,600 $ 38,000 $205, Admission of Jaime Holden: Equity of initial partners prior to admission.................. $100, Contribution by Holden.................................................... 25, Total.................................................................................... $125, Holden’s equity interest after admission....................... × 20% Holden’s equity after admission..................................... $ 25, Contribution by Holden.................................................... 25, No bonus........................................................................... $ 0 Net income distribution: The income-sharing ratio is equal to the proportion of the capital balances after admitting Holden according to the partnership agreement: Jen Wilson: $ 125 , 000 $ 45 , 000 = 36% Teresa McDonald: $ 125 , 000 $ 55 , 000 = 44% Jaime Holden: (^) $ 125 , 000 $ 25 , 000 = 20% These ratios can be multiplied by the $130,000 remaining income ($160,000 – $30,000 salary allowance to Wilson) to distribute the earnings to the respective partner capital accounts. Withdrawals:
a. Merchandise Inventory.................................................. 24, Allowance for Doubtful Accounts........................... 5, Luke Gilbert, Capital................................................. 7,800^1 Marissa Cohen, Capital............................................ 5,200^2 Tyrone Cobb, Capital............................................... 5,200^2 (^1) ($24,000 – $5,800) × 3/ (^2) ($24,000 – $5,800) × 2/ b. Luke Gilbert, Capital...................................................... 252,800^1 Cash........................................................................... 52, Notes Payable........................................................... 200, (^1) $245,000 + $7,
a. The income-sharing ratio is determined by dividing the net income for each member by the total net income. Thus, in 2010, the income-sharing ratio is as follows: Nevada Properties, LLC: (^) $ 300 , 000 $ 90 , 000 = 30% Star Holdings, LLC: $ 300 , 000 $ 210 , 000 = 70% Or a 3:7 ratio b. Following the same procedure as in (a): Nevada Properties, LLC: $ 400 , 000 $ 100 , 000 = 25% Star Holdings, LLC: (^) $ 400 , 000 $ 220 , 000 = 55% Randy Reed: $ 400 , 000 $ 80 , 000 = 20% c. Randy Reed provided a $290,000 cash contribution to the business. The amount credited to his member equity account is this amount less a $20, bonus paid to the other two members, or $270,000.
d. The positive entries to Nevada Properties and Star Holdings are the result of a bonus paid by Randy Reed. e. Randy Reed acquired a 20% interest in the business, computed as follows: Randy Reed’s contribution.................................. $ 290, Nevada Properties, LLC, member equity........... 540 , Star Holdings, LLC, member equity................... 520 , Total....................................................................... $1,350, Reed’s ownership interest after admission ($270,000 ÷ $1,350,000)........................................ 20%
a. Cash balance................................................... $ 16, Sum of capital accounts................................. 20, Loss from sale of noncash assets................ $ 4, Pryor Lester Capital balances before realization............... $ 12,000 $8, b. Division of loss on sale of noncash assets 2,000* 2,000* Balances........................................................... $ 10,000 $6, c. Cash distributed to partners.......................... 10,000 6, Final balances................................................. $ 0 $ 0 *$4,000/
Bradley Barak Total Capital balances before realization............... $ 26,000 $35,000 $61, Division of gain on sale of noncash assets [($76,000 – $61,000)/2]............................... 7,500 7,5 00 Capital balances after realization.................. $ 33,500 $42, Cash distributed to partners.................. 33,500 42, Final balances................................................. $ 0 $ 0