1 answer

Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his...

Question:

Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O’Donnell invests a building worth $62,000 and equipment valued at $36,000 as well as $32,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances.

To entice O’Donnell to join this partnership, Reese draws up the following profit and loss agreement:

  • O’Donnell will be credited annually with interest equal to 10 percent of the beginning capital balance for the year.
  • O’Donnell will also have added to his capital account 20 percent of partnership income each year (without regard for the preceding interest figure) or $4,000, whichever is larger. All remaining income is credited to Reese.
  • Neither partner is allowed to withdraw funds from the partnership during 2016. Thereafter, each can draw $6,000 annually or 10 percent of the beginning capital balance for the year, whichever is larger.

The partnership reported a net loss of $10,000 during the first year of its operation. On January 1, 2017, Terri Dunn becomes a third partner in this business by contributing $25,000 cash to the partnership. Dunn receives a 25 percent share of the business’s capital. The profit and loss agreement is altered as follows:

  • O’Donnell is still entitled to (1) interest on his beginning capital balance as well as (2) the share of partnership income just specified.
  • Any remaining profit or loss will be split on a 6:4 basis between Reese and Dunn, respectively.

Partnership income for 2017 is reported as $62,000. Each partner withdraws the full amount that is allowed.

On January 1, 2018, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $95,000 directly to Dunn. Net income for 2018 is $66,000 with the partners again taking their full drawing allowance.

On January 1, 2019, Postner withdraws from the business for personal reasons. The articles of partnership state that any partner may leave the partnership at any time and is entitled to receive cash in an amount equal to the recorded capital balance at that time plus 10 percent.

  1. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries.

  2. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries.


Answers

($65000+10%)+$ 4000 Loss from business 10000 01/01/2017 Cash ODonnells Capital (36250-25000)20% Reese Capital (36250-25000BONUS METHOD Dale DebitCredit 62000 36000 32000 01/01/2016 Building Equipment Cash Rees Capital ODonell Capital 65000 65000

BONUS METHOD Dale DebitCredit 62000 36000 32000 01/01/2016 Building Equipment Cash Rees Capital O'Donell Capital 65000 65000 31/12/2016 Reese Capital 20500 O'Donell Capital ($650001096)+54000 Loss from business 10500 10000 01/01/2017 Cash O'Donell's Capital (36250-25000)20% Reese Capital (36250-25000)"80% 25000 2250 9000 Dunn Capital (1450002596) 36250 31/12/2017 Income 62000 O'Donell Capital (620002090)+ (75500-2250)"10% Reese Capital (62000-12400)"60% Dunn Capital (62000-12400),40%) 19725 29760 19840 01/01/2018 Dunn Capital IF11 47160 Postner Capital (36250-6000+16910) 47160 31/12/2018 Income 74565 O'Donell's Capital (8565010%) + (6600020%) 21765

.

Similar Solved Questions

1 answer
103 H002 ( Fall 19 Mat 103 H002 (MW) Trigonometry (Dr. Bullock) Frederick Gray Quiz: Quiz...
103 H002 ( Fall 19 Mat 103 H002 (MW) Trigonometry (Dr. Bullock) Frederick Gray Quiz: Quiz 5.1, 5.2, 5.3 Time Remain This Question: 1 pt 9 of 12 (5 complete) 14 MON Factor the trigonometric expression. (1- cos xp? - (1 + cos x2 (1-сos x)? - (1 + cos x)?-Q (Simplify your answer.) Work on Nei 10 ...
1 answer
05/22/2019 OIELH 2333 Strength of Material First Name Student ID: Family Name 1- A section of...
05/22/2019 OIELH 2333 Strength of Material First Name Student ID: Family Name 1- A section of a 51-mm-diameter standard-weight steel pipe is bent into the form shown and rigidly embedded in a concrete footing. Calculate the stresses at points A and B on the pipe. P is 900 N and e is 600 mm. Use Appe...
1 answer
T0 0 pg1g-d-Term Exam Dr. Hope E. Dameron 24. A tax on consurmers of a good...
t0 0 pg1g-d-Term Exam Dr. Hope E. Dameron 24. A tax on consurmers of a good would shift the curve down and cause the price paid by consumers to a. supply; increase b. demand: decrease, then return to its original level c. supply; decrease d. demand, increase supply; increase, them returm to its orig...
1 answer
Could you please provide an accurate answer for the following question. Please only answer if you...
Could you please provide an accurate answer for the following question. Please only answer if you are 100% certain you can solve it correctly. I will leave feedback that matches the effort and quality of your response. Thank you. This is a vibrations question. Th image below shows a bifilar pendulu...
1 answer
Ex. 6: (Change of phase), using Cp to calculate Enthalpy A feed stream to a evaporation...
Ex. 6: (Change of phase), using Cp to calculate Enthalpy A feed stream to a evaporation unit contains an equi-molar mixture of benzene and toluene at 10°C The vapour stream from the top of the evapoator contains 68.4 mol% benzene at 50 °C and the liquid stream from the bottom contains 40 mol...
1 answer
A manufacturer els paperback books in the retail stores and wanted to examine the relationship between...
A manufacturer els paperback books in the retail stores and wanted to examine the relationship between price and demand. The price of a particular novel was adjusted each week and the weekly sales were recorded in the accompanying table Management would like to use pregression analysis to estime wek...
1 answer
X X X X X X X X t-0.70 S X X X X X X...
X X X X X X X X t-0.70 S X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Flux (T m^2) Magnetic flux as a function of time (s) i 2 3 4 5 6 8 9 10 11 12 (A) Induced current as a function of time (s) 2 3 4 5 6 8 9 10 11 12 Play Pause <...
1 answer
QUESTION 8 Problem 2) True False (3) Type II Error is the probability that you reject...
QUESTION 8 Problem 2) True False (3) Type II Error is the probability that you reject the null hypothesis when it was true. True False...
1 answer
The Alternating Series Test and convergence. 8 = angle Pod sino g 3! as 3! a...
The Alternating Series Test and convergence. 8 = angle Pod sino g 3! as 3! a 7 " Functions can often be represented by an infinite series. A series reprezentation can help to solve differential equations, to fin derivatives, or to compute integrals involving the function. Computers also use thes...
1 answer
Question 10 on the P-v diagram shown, the dashed lines represent P-v diagram of a pure...
Question 10 on the P-v diagram shown, the dashed lines represent P-v diagram of a pure substance Lines of constant temperature Lines of constant pressure Lines of constant volume Saturated liquid curve Click Submit to complete this assessment...
1 answer
What types of technologies are used by massive multiplayer games that could be used in other...
What types of technologies are used by massive multiplayer games that could be used in other ways? SOURCES: Hugh, Lessig, "The New Army: A Newport News tech center uses gaming and apps to train soldiers." Daily Press, January 28, 2012, http://articles.dailypress.com/2012-01-28/news/dp-nus-bi...
1 answer
Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred, and manufacturing...
Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred, and manufacturing overhead cost incurred; (2) assignment of direct materials, labor, and overhead to production; and (3) completion of jobs and sale of goods. Post the entries to Work in Process Inven...
1 answer
A crime is observed by a group of n people. Each person would like the police...
A crime is observed by a group of n people. Each person would like the police to be informed, but prefers that someone else make the phone call. Specifically, suppose that each person attaches the value v to the police being informed and bears the cost cif she makes the phone call, where v >c>...
1 answer
A card is drawn from a pack of 52. How do you find the probability of that card to be an Jack or a King?
A card is drawn from a pack of 52. How do you find the probability of that card to be an Jack or a King?...
1 answer
A mixture of 125.1 g of P and 129.2 g of O, reacts completely to form...
A mixture of 125.1 g of P and 129.2 g of O, reacts completely to form P,0, and P, O. Find the masses of P, that are formed by the reaction. and P,0 mass of P,0 : mass of P,00...
1 answer
IUU Notes d. objects B and C will land first and together e. all three will...
IUU Notes d. objects B and C will land first and together e. all three will land at the same time 13. A plane must fly to a destination located due north from its departure point. A gentle wind is blowing from the south-west. What direction must the plane point to reach its destination? a. north d. ...
1 answer
. gymnosperms, like the conifers, are characterized by having wind-dispersed pollen. how was this method of...
. gymnosperms, like the conifers, are characterized by having wind-dispersed pollen. how was this method of pollen dispersal an important evolutionary adaptation for these plants?   ...
1 answer
Find the present value of $11,000 if the interest paid is at a rate of 10%...
Find the present value of $11,000 if the interest paid is at a rate of 10% compounded continuously for 2 years. The present value is $ (Do not round until the final answer. Then round to the nearest cent as needed.)...