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 $120,000 and equipment valued at $120,000 as well as $40,000 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 20 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 $7,000 annually or 10 percent of the beginning capital balance for the year, whichever is larger.

The partnership reported a net loss of $9,000 during the first year of its operation. On January 1, 2017, Terri Dunn becomes a third partner in this business by contributing $53,000 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 $90,000. 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 $180,000 directly to Dunn. Net income for 2018 is $150,000 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

قراردا Interest on Capitel. 56000 To Donell capitol 5 Cbeing Interes berceelit to something Pecotit & loss en loon i To DonelJournal Entries. Building Alo Dr. 12oor equipment Alcor. 12000 Cash Ale Dr, yoooo * To o Donell.</p><p>Capitel Ale pour Being capit

.

Similar Solved Questions

1 answer
Suppose UIL is interested in the amount of money per year that parents pay for private...
Suppose UIL is interested in the amount of money per year that parents pay for private volleyball lessons for their child. High School Sports Illustrated reports that the amount of money per year that parents pay for private volleyball lessons is normally distributed with a mean of $2400 and standar...
1 answer
00250M D) 0.0625 M E) 0.375 72) Which of the following solutions will have the highest...
00250M D) 0.0625 M E) 0.375 72) Which of the following solutions will have the highest concentration of chloride ions? A) 0.10M AICI B) 0.10 M LICI C) 0.10 M MgCl2 D) 0.05 M CaCl2 E) All of these solutions have the same concentration of chloride ions. DOOM 9) How many moles of KBr are required to ma...
1 answer
Q 10- For the following acid-base reaction, predict which side the equilibrium is favored (circle or...
Q 10- For the following acid-base reaction, predict which side the equilibrium is favored (circle or draw an arrow pointing the favored side). Calculate the Keg from the pKa given. PK, -30 Kea pk, 10...
1 answer
5.5 points Save As Cranial nerve II, the optic nerve sends nerve impulses to the brain...
5.5 points Save As Cranial nerve II, the optic nerve sends nerve impulses to the brain carrying information about the things we see. These nerve fibers most likely belong to which division of the nervous system? sensory (afferent) division somatic nervous system sympathetic division parasympathetic ...
1 answer
1500 1000 500 2 2010 2015 2005 Year
additive or multiplicative seasonality? 1500 1000 500 2 2010 2015 2005 Year 1500 1000 500 2 2010 2015 2005 Year...
1 answer
You are given a PM as shown below: START READ READ ACCEPT ADD a a READ3...
You are given a PM as shown below: START READ READ ACCEPT ADD a a READ3 ADD Which of the following statements are correct? Choose all that apply. The string "abba1a" makes the given PM looping forever. This given PM accepts the language of "a", n > 0. The string "ababbb" c...
1 answer
Please use examples to explain the principle on how to calculate the sample size.
Please use examples to explain the principle on how to calculate the sample size....
1 answer
How do you calculate using TVM solver? 23. Bills planning for his daughter's college education to...
How do you calculate using TVM solver? 23. Bills planning for his daughter's college education to being in 7 years. He estimates the costs to be $15,000 per year for her 4 year degree. He also feels he can earn 7% on any money he invests over the next 7 years and during the 4 college years. H...
1 answer
In #547, give the null and alternative hypotheses and identify the claim. Then, set-up the appropriate...
In #547, give the null and alternative hypotheses and identify the claim. Then, set-up the appropriate test value.DO NOT PERFORM A COMPLETE HYPOTHESIS TEST! Properly label all variables and parameters...
1 answer
A 12" diameter rigid conduit returns RAS back from the secondary tank to the PE channel....
A 12" diameter rigid conduit returns RAS back from the secondary tank to the PE channel. The length of conduit is approximately 2500 feet. With the RAS flow at 0.1 MGD and the pipe is assumed full all time, what is the estimated detention time (travel time) for the RAS to circulate from the seco...
1 answer
First, ask the user for a positive integer called “length”. If the user does not provide...
First, ask the user for a positive integer called “length”. If the user does not provide an integer, or if the integer is not positive, then ask again, by asking inside a while loop. The acceptable integer is intended to indicate the user’s desired twist length. A twist is always t...
1 answer
Please show work! Required information The Foundational 15 (L04-1, LO4-2, LO4-3, LO4-4, LO4-5) [The following information...
please show work! Required information The Foundational 15 (L04-1, LO4-2, LO4-3, LO4-4, LO4-5) [The following information applies to the questions displayed below.) Clopack Company manufactures one product that goes through one processing department called Mixing. All raw materials are introduced at...
1 answer
Find the solution to the initial value problem 1 [E]'-: :] [:] [:O] - [8]
Find the solution to the initial value problem 1 [E]'-: :] [:] [:O] - [8]...
1 answer
In the following RLC circuit R= 100 O's C= 20 uF and L= 0.025 H. The...
In the following RLC circuit R= 100 O's C= 20 uF and L= 0.025 H. The peak voltage is 150 V and frequency is 200 Hz. mo R L С 2 (a)(8 pts) Find the impedance of the circuit and the phase angle: (b)(5 pts) The power factor (coso), the peak current, and the RMS current: (c)(6 pts) What is the...
1 answer
Surveys have indicated that in a given region 79% of car occupants wear seat belts regardless...
Surveys have indicated that in a given region 79% of car occupants wear seat belts regardless of where they sit in the car. Wearing of seat belts in the region is random and shows no regular pattern. The surveys have shown also that in 45% of cars the driver is the sole occupant, in 25% there are tw...
1 answer
Che As of the end of June, the job cost sheets at Racing Wheels, Inc., show...
Che As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs. Job 102 Job 103 Job 104 Direct materials $56,000 $38,000 13,000 5, 200 $58,000 41,000 16,400 Direct labor 25,600 10,240 Overhead applied Job 102 was started in prod...