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 $100,000 and equipment valued at $88,000 as well as $42,000 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 15 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 $9,000 annually or 20 percent of the beginning capital balance for the year, whichever is larger.

The partnership reported a net loss of $12,000 during the first year of its operation. On January 1, 2017, Terri Dunn becomes a third partner in this business by contributing $32,000 cash to the partnership. Dunn receives a 20 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 $74,000. 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 $120,000 directly to Dunn. Net income for 2018 is $76,000 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

Date

Paticular

Ledger folio.

Debit Amount

Credit Amount

Cash a/c.                         –Dr.

Building a/c.                   –Dr.

Equipment a/c.              –Dr.

                To Capital a/c

(Being cash, building, equipment contributed

By owner)

                                         

-

$100,000

$88,000

$42,000

230,000

Steve Reese a/c.            –Dr.

O’Dennel a/c.                 –Dr.

                 To Income Summary a/c.

(Being Allocation of $12,000 net loss to partners)

-

$6,000

$6,000

$12,000

Cash a/c.                         –Dr.

                 To Capital a/c.

(Being Cash contributed by new partner)

-

$32,000

$32,000

Income Summary          -Dr.

                 To Resse a/c

                 To O’Dennel a/c

                 To Dunn a/c

(Being allocation of $74,000 net income to partners according to partnership deed)

-

$74,000

$35,700

$15,500

$23,800

Income Summary a/c   -Dr.

                 To Resse a/c.

                 To O’Dennel a/c

                 To Postner a/c

(Being allocation of $76,000 net income to partners)

-

$76,000

$34,200

$19,000

$22,800

.

Similar Solved Questions

1 answer
Calculate the pH of the solution after the addition of each of the given amounts of...
Calculate the pH of the solution after the addition of each of the given amounts of 0.0541 M HNO, to a 70.0 mL solution of 0.0750 M aziridine. The pK, of aziridinium is 8.04. What is the pH of the solution after the addition of 0.00 mL HNO,? pH = What is the pH of the solution after the addition of ...
1 answer
“For there to be a zero-sequence current to flow in a three-phase circuit there must be...
“For there to be a zero-sequence current to flow in a three-phase circuit there must be a connection to ground.” (true or false statement?) a. True b. False...
1 answer
You are caring for a patient that is diabetic and taking insulin lispro and insulin glargine....
You are caring for a patient that is diabetic and taking insulin lispro and insulin glargine. 1. What is the differences to these two insulins? Include the onset, peak, and duration times along with any other differences 2. What assessment would the nurse make prior to administering either medicatio...
1 answer
Solve 1.3.7 Aliakbar Montazer Haghigh 42 2 +16 1364i 3.6.) lmI lim For 1.3.9-17, evaluate. 1.3.9.e/2...
solve 1.3.7 Aliakbar Montazer Haghigh 42 2 +16 1364i 3.6.) lmI lim For 1.3.9-17, evaluate. 1.3.9.e/2 310 Lai1+ i). 1.3.12. cos(3-i...
1 answer
Wop mig genuer, Hellect, and sexual orientation O b. the belief that you can effectively accomplish...
wop mig genuer, Hellect, and sexual orientation O b. the belief that you can effectively accomplish a specific outcome. O c. the ability to make fun of one's self. O d. feeling great about who you are. QUESTION 25 A child can nod its head before it can snap its fingers due to the influence of O ...
1 answer
Over the past half-century, the increase in incomes and decline in hours worked have allowed American...
Over the past half-century, the increase in incomes and decline in hours worked have allowed American consumers to enjoy more leisure time and increase their spending on entertainment. After graduating from the Walton College of Business, you were hired by Ajax consulting company. Because you earned...
1 answer
Show work 7. In the "Accelerated Cost Recovery System" or ACRS depreciation method, the depreciation in...
Show work 7. In the "Accelerated Cost Recovery System" or ACRS depreciation method, the depreciation in the year of disposal in case of early disposal is (a) Half of normal depreciation (b) Full depreciation for that year (C) No depreciation in the year of disposal (d) The book value remain...
2 answers
A healthy patient underwent total knee replacement surgery; regional anesthesia services were provided by an anesthesiologist....
A healthy patient underwent total knee replacement surgery; regional anesthesia services were provided by an anesthesiologist. what is the assign CPT anesthesia code(s) and appropriate modifier(s). (Enter the physical status modifier first, such as 00000-P1-AA.). Some cases require assignment of CPT...
1 answer
Where are the hidden lines given the top view front view and the side views I...
Where are the hidden lines given the top view front view and the side views I am lost need some what of an explanation 6.4,6.4...
1 answer
Ent CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 4-9 The ledger of Pina Colada Corp....
ent CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 4-9 The ledger of Pina Colada Corp. on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared. Debit Credit $3,140 3,960 24,300 Prepaid Insurance Equipment Accumulated Depreciation-Eq...
1 answer
Q1) Independent-Samples t Test (25 points total) A clinic specializing in eating disorders would like to...
Q1) Independent-Samples t Test (25 points total) A clinic specializing in eating disorders would like to evaluate the effectiveness of a nutritional training program on binge eating disorder (BED). A psychologist was hired to conduct a small study to examine the potential effect of nutritional train...
1 answer
I have posted photos for My Question. Please Help . We were unable to transcribe this imageSustainable Growth Rate- Return on Equity x Plowback Ratio Sustainable Growth Rate-4/30 0.5-0.067 Sea Shore...
I have posted photos for My Question. Please Help . We were unable to transcribe this imageSustainable Growth Rate- Return on Equity x Plowback Ratio Sustainable Growth Rate-4/30 0.5-0.067 Sea Shore Salt's beta had averaged about .5, which made sense, Bernice thought, for a stable, steady-growt...
1 answer
KB. Casa Loma Industries is considering a $300,000 capital investment with the following projected cash flows:...
KB. Casa Loma Industries is considering a $300,000 capital investment with the following projected cash flows: Year Year 4 1 Cash Flows $60,000 $140,000 $90,000 Cash Flows $50,000 $40,000 $30,000 2 5 6 3 The payback period is rounded to 6 years Some other answer 4 years 3 years 3 months 3 years 2 mo...
1 answer
James Manufacturing had the following Information available for July: Flexible Budget Variance Flexible Budget Sales Activity...
James Manufacturing had the following Information available for July: Flexible Budget Variance Flexible Budget Sales Activity Variance 4,000U Actual Results 14,000 ? Master Budget $11,000F Units Sales revenue Less: Variable manufacturing costs Variable marketing and administrative Contribution margi...
1 answer
1.Which cells are the link between the innate immune system and the adaptive immune system? 1....
1.Which cells are the link between the innate immune system and the adaptive immune system? 1. A. Memory cells B. Cytotoxic T-cells C. Antigen-Presenting cells D. Endothelial cells 2.Epidemiological clues to the cause of an infectious disease include statistics on: A. age, geographic location, genet...
1 answer
In coherent schemes, a small pilot is added for synchronization. Because the pilot does not carry...
In coherent schemes, a small pilot is added for synchronization. Because the pilot does not carry information, it causes degradation in P. Consider a coherent PSK that uses the following two pulses of duration Tg: p(t) = AV1 - m2 cos wet +A m sin wet 4(t) = -AVI - m² cos wet + Am sin wet Ep + E...