Penny, Quinn and Randy formed a partnership business called 3D Graphics Company. Their investments to the partnership were $80,000, $50,000, and $30,000 respectively. In addition, they agreed to share profits as follows:

1. The first $40,000 to be allocated on the basis of their original capital investments to the partnership.
2. The next $50,000 to be allocated on the basis of their service performed, with Penny drawing $30,000 and Randy drawing $20,000.
3. The remaining is to be allocated on the ratio of 5:3:2 respectively.

Required:

1. a.If the business earned a profit of $65,000 during the year, show the share of profit to each partner. (11 marks)
2. b.Journalize the distribution of profit to the partner’s capital account. (4 marks)

Question 2 (11 marks) Admission of New Partner

The Felton and Burchell Partnership has partner capital account balances as follows: Felton, Capital, $550,000 and Burchell, Capita, $200,000. The partners share income and losses in the ratio of 60% to Felton and 40% to Burchell.

Case:

1. Santos pays $400,000 to Felton and $150,000 to Burchell for one-half of each of their ownership interest in a personal transaction.
2. Santos invests $600,000 in the partnership for a one-third interest in partnership capital.

3. Santos invests $240,000 in the partnership for a one-third interest in partnership capital.

Required:

a. Prepare the journal entry on the books of the partnership to record the admission of Santos as a new partner based on the above three (3) independent circumstances.

Question 3 Admission of Partners

Kim Locke and Mary Leigh Coker have capital accounts of $420,000 and $480,000, respectively. Jeff Doggett and Danny Cambrey are to join the partnership. Doggett invests

$425,000 in the partnership for which he receives a capital credit of $425,000. Cambrey purchases a one-half interest from Locke for $300,000 and a one-fourth interest from Coker for $90,000.

Required:

1. a.Prepare the journal entries to record the admission of Doggett and Cambrey to the partnership.
2. b.Determine the capital balances of the partners after the admission of Doggett and Cambrey.

Question 4 Withdrawal

Brislin, Humphreys, and Watkins share income and losses in a ratio of 3:2:5, respectively. The capital account balances of the partners are as follows: Brislin Capital, $600,000; Humphreys, Capital, $360,000; and Watkins, Capital $260,000.

Required:

Prepare the journal entry on the books of the partnership to record the withdrawal of Watkins under the following independent circumstances:

1. a.The partners agree that Watkins should be paid $280,000 by the partnership for his interest.
2. b.The partners agree that Watkins should be paid $220,000 by the partnership for his interest.

Brislin agrees to pay Watkins $180,000 for one-half of his capital interest and Heller agrees to pay Watkins $180,000 for one-half of his capital interest in a personal transaction among the partners.

Answer rating: 100% (QA)

QUESTION 1 a Penny 3750000 Quinn 5000000 Randy 2250000 b Dr Net Income 65000 Cr Capital Penny 375000... View the full answer