On February 14, 2013, Isabelle Moretti, Aida Kam, and Channade Fenandoe start a partnership to operate a
Question:
On February 14, 2013, Isabelle Moretti, Aida Kam, and Channade Fenandoe start a partnership to operate a marketing consulting practice. They sign a partnership agreement to split profits in a 2:3:4 ratio for Isabelle, Aida, and Channade, respectively. The following are transactions for MKF Marketing:
2013
Feb. 14 The partners contribute assets to the partnership at the following agreed amounts:
________________________I. MorettiA. KamC. Fenandoe
Cash.................................$ 9,000........$12,000..............$18,000
Furniture............................15,000
Equipment...........................................24,000................40,000
Total...............................$24,000........$36,000...............$58,000
They also agree that the partnership will assume responsibility for Channade's accounts payable of $10,000.
Dec. 20 Th e partners agree to withdraw a total of $72,000 cash as a “year-end bonus.” Each partner will receive
a share proportionate to her profit-sharing ratio. No other withdrawals were made during the year.
31 Total profit for 2013 was $81,900.
2014
Jan. 5 Th e three partners agree to admit Carolyn Wells to the partnership. Carolyn will pay Channade $30,000 cash for 50% of her interest in the partnership. The profit-sharing ratio will be changed so that Carolyn is allocated 50% of what was previously allocated to Channade. Th e partnership’s name is changed to MKFW Marketing.
Dec. 20 Th e partners agree to pay another “year-end bonus.” Th e total amount withdrawn is $91,800. Each partner will receive a share proportionate to her profi t-sharing ratio. No other withdrawals were made during the year.
31 Total profit for 2014 was $103,050.
2015
Jan. 2 Channade withdraws from the partnership. Th e partners agree the partnership will pay her $25,550 cash. Th e partnership’s name is changed to MKW Marketing.
Instructions
(a) Record the above transactions. For the profi t earned each year, calculate how it is to be allocated and record closing the income summary account.
(b) Prepare the statement of partners’ equity for 2014.
(c) Calculate the balance in each partner’s capital account on January 2, 2015, aft er Channade has withdrawn.
TAKING IT FURTHER Every time a new partner is admitted to a partnership or a partner withdraws from a
partnership, it is necessary to change the name of the partnership to reflect the fact that a new partnership has been
Accounts PayableAccounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Step by Step Answer:
a 2013 Feb 14 Cash 9000 Furniture 15000 I Moretti Capital 24000 14 Cash 12000 Equipment 24000 A Kam Capital 36000 14 Cash 18000 Equipment 40000 Accounts Payable 10000 C Fenandoe Capital 48000 Dec 20 I ...View the full answer
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
