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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions

12. What are the two basic requirements to support the declaration of a cash dividend? What are the effects of a cash dividend on assets and stockholders’ equity?
11. What three dates are significant for dividends? What changes are made to the financial statement accounts on each of these three dates?
10. How is treasury stock reported on the balance sheet? How do the financial statements report the “gain or loss” on treasury stock reissued above or below cost?
9. What is treasury stock? Why do corporations acquire treasury stock?
8. What is the distinction between par value and no-par value capital stock?
7. Explain each of the following terms: (a) authorized common stock , ( b ) issued common stock , and ( c ) outstanding common stock .
6. In what ways does owner’s equity differ for proprietorships and for corporations?
5. What are the relative advantages of equity versus debt financing?
4. What are the usual characteristics of preferred stock?
3. What are the differences between common stock and preferred stock?
2. What four benefits do owners of common stock usually enjoy?
1. Identify the primary advantages of the corporate form of business.
CP12-4 Forming a Partnership or Limited Liability Company Assume you are considering forming a general partnership or a limited liability company (LLC) in your state. Search the Internet for the required documents and forms needed to establish such business forms in your state. A good starting
CP12-3 Making Ethical Decisions: A Mini-Case Frank was recently hired as an accountant for the TMM Partnership. When the partnership published its quarterly figures, Frank noticed the return on equity figures seemed odd. After asking a few co-workers, he found that the figures were artificially and
CP12-2 Resolving Inequitable Partnership Contributions Last year, Mick and Sayesha entered into a partnership to establish and run a local music promotions business called MuSick Promos (MSP). Both partners contributed $2,000 to the business to get MSP off the ground. They had verbally agreed to
CP12-1 Making Key Partnership Decisions Harrison and Daniel are two brothers who have been developing video games for several years as a hobby. Their games have proven to be very popular, so they recently decided to turn their hobby into a business venture. Harrison—the older and more responsible
PB12-9 Calculating Partner Return on Equity (ROE) Preppen, Somme, and Allison are partners in the PSA partnership. Information related to the partners follows. Total Preppen Somme Allison Balance 1/1/2008 $40,000 $5,000 $10,000 $25,000 Contributions 6,000 2,000 2,000 2,000 Net income 25,000 8,000
PB12-8 Liquidating a Partnership with Capital Deficiency (Payment and Nonpayment by Partner) and Making Journal Entries Assume the same facts as in PB12-7, except that the fixed ratios for Flour, Rice, and Salt are 25%, 30%, and 45%, respectively. Required: Assume the assets of Flour, Rice, and
PB12-7 Liquidating a Partnership with No Capital Deficiency and Making Journal Entries Assume when the partnership of Flour, Rice, and Salt liquidates, account balances before liquidation are as follows. Assets Liabilities and Owners’ Equity Cash $ 16,000 Accounts payable $ 12,000 Inventory
PB12-6 Journalizing Partner Withdrawals Pinkey, Brainne, and Snobal are partners in the Take Over partnership. Snobal decides to withdraw from the partnership. According to the partnership agreement, any bonuses will be allocated on the basis of fixed ratios prior to the withdrawal. Additional
PB12-5 Admitting a Partner—Journalizing Purchase and Investment Situations Dott and Latta are partners in the DL partnership. They agree to admit Caspar into the partnership. Assume any bonuses will be allocated on the basis of the fixed ratio prior to the admission of the new partner. Additional
PB12-4 Dividing Income, Journalizing, and Preparing Partners’ Capital Statement C. Crow, R. Beare, and K. Marin are partners in the CRM partnership. Partnership net income for 2009 is $59,000. Other relevant information follows.Required: 1. Allocate the net income to the partners based on the
PB12-3 Dividing Income—All Four Methods Toffee and Bonnie are partners in the Toffnie partnership. Partnership net income for the current year is $81,000. Other relevant information follows.Required: Determine the allocation of net income to each of the partners under each of the following four
PB12-2 Forming a Partnership—Cash and Noncash Contributions, Making Journal Entries, and Creating Owners’ Equity Section of the Balance Sheet R. Tex, T. Ark, and L. Ana form the TexArkAna partnership on November 16, 2009. The book and fair market values of the contributed assets
PB12-1 Matching Terminology with Definitions Following are the terms and definitions covered in Chapter 12. Match each term with its definition by entering the appropriate letter in the space provided. Use one letter for each blank. Terms Definitions ___ 1. Mutual agency A. Lack of sufficient
PA12-9 Calculating Partner Return on Equity (ROE) Gren, Bare, and Rett are partners in the GBR partnership. Information related to the partners follows. Total Gren Bare Rett Balance 1/1/2008 $71,000 $20,000 $30,000 $21,000 Contributions 20,000 10,000 5,000 5,000 Net Income 33,000 11,000 11,000
PA12-8 Liquidating a Partnership with Capital Deficiency (payment and nonpayment by partner) and Making Journal Entries Assume the same facts as in PA12-7. Required: Assume the Shasta, Sheba, and Sheeva partnership sold its assets (except cash) for $12,000. Record the following entries: 1. Sale of
PA12-6 Journalizing Partner Withdrawals Carrtman, Kennie, and Kile are partners in the Southe Parke partnership. Kennie’s death required his withdrawal from the partnership. According to the partnership agreement, any bonuses will be allocated on the basis of fixed ratios prior to the withdrawal.
PA12-5 Admitting a Partner—Journalizing Purchase and Investment Situations Dick and Jane are partners in the DJ partnership. They agree to admit Spot into the partnership. According to the partnership agreement, any bonuses will be allocated on the basis of the fixed ratio prior to the admission
PA12-4 Dividing Income, Journalizing, and Preparing Partners’ Capital Statement A. Batt, B. Robbin, and F. Catt are partners in the Batt R Catt partnership. Partnership net income for 2009 is $46,000. Other relevant information follows: Capital 1/1/09 Capital Contributions Fixed Ratio Partner
PA12-3 Dividing Income—All Four Methods Mills and Cross are partners in the MC partnership. Partnership net income for the current year is $52,200. Other relevant information follows.Required: Determine the allocation of net income to each of the partners under each of the following four
PA12-2 Forming a Partnership—Cash and Noncash Contributions, Making Journal Entries, and Creating Owners’ Equity Section of the Balance Sheet M. Arsee, P. Ann, and G. Tsosi form the MAT partnership on January 8, 2009. The book and fair market values of the contributed assets follow.Required: 1.
PA12-1 Identifying Characteristics of Partnerships and Limited Liability Companies (LLCs) Following are various characteristics of partnerships and LLCs discussed in the chapter. For each characteristic, indicate the form(s) of business, partnership (A) or limited liability company (B), the
E12-14 Calculating Partnership Return on Equity Assume the following information for the partnership of Domee and Gleegal.Required: 1. Calculate the ending capital balance for each partner. 2. Calculate the return on equity (ROE) for each partner. 3. Explain the primary cause of any differences in
E12-13 Liquidating a Partnership—Capital Deficiency (nonpayment by partner) Refer to E12-11. Assume the same facts except that the assets of Law Dee Daw partnership (except cash) are sold for $28,000. Required: Determine the amount of cash to be distributed to the remaining partners upon
E12-12 Liquidating a Partnership—Capital Deficiency (payment by partner) Refer to E12-11. Assume the same facts except that the assets of Law Dee Daw partnership (except cash) are sold for $28,000. Required: Determine the amount of cash to be distributed to the remaining partners upon
E12-11 Liquidating a Partnership—No Capital Deficiency The partnership of Law Dee Daw liquidates, and the account balances before liquidation follow. Assets Liabilities and Owners’ Equity Cash $ 6,000 Accounts payable $19,000 Other partnership assets (net) 44,000 Notes payable 8,000 L. Law,
E12-10 Journalizing Admission and Withdrawal of a Partner—Among Partners Frey, Dones, and Bance are partners in the FDB partnership. Additional information available prior to the admission or withdrawal of any partners follows: Frey Dones Bance Capital balances $10,000 $20,000 $30,000 Fixed ratio
E12-9 Journalizing Withdrawal of Partner—Payment from Partnership with Bonus to Exiting Partner Assume the facts in E12-8. Required: According to the partnership agreement, any bonuses resulting from a partner’s withdrawal from the partnership should be allocated on the basis of fixed ratios
E12-8 Journalizing Withdrawal of Partner—Payment from Partnership with Bonus to Remaining Partners Wallice, Gromett, Victer, and Warerabbit are partners in the Gromwell partnership. Warerabbit decides to withdraw from the partnership. Additional information available prior to the withdrawal
E12-7 Journalizing Admission of a Partner—Investment with Bonus to New Partner Assume the same facts as in E12-6 except that Cluck invests $31,950. Required: 1. Determine the capital account balance for each partner after the new partner is admitted. 2. Prepare the journal entry to admit the new
E12-6 Journalizing Admission of a Partner—Investment with Bonus to Existing Partners Click and Clack are partners in the CC partnership. They agree to admit Cluck into the partnership. Cluck invests $45,000 into the partnership in exchange for a one-third interest in the partnership. Assume any
E12-4 Journalizing Division of Income—Various Allocations Crane, Del, and Egbert are partners in the CDE partnership. Partnership net income for the current year is $70,000. Other relevant information appears in the following table.Required: Determine the allocation of net income to each partner
E12-3 Journalizing Partnership Formation—Cash and Noncash Contributions Georgy Cloon and Alfred Nunley form a partnership. The book and fair market values of the contributed assets follow:Required: Based on the information presented, prepare the journal entry to record the contributions made by
E12-2 Identifying Advantages and Disadvantages of a Limited Liability Company (LLC) Following are characteristics of a limited liability company. Determine whether each characteristic is an advantage (A) or a disadvantage (B). Limited Liability Company Characteristic 1. Limited liability. Limited
E12-1 Identifying Advantages and Disadvantages of a Partnership The following are characteristics of a partnership. Determine whether each characteristic is an advantage (A) or a disadvantage (B). 1. Partnership Characteristic Limited life. Co-ownership of property. Mutual agency. Ability to raise
M12-17 Calculating Partnership Return on Equity Using the information in the following table, calculate the ROE for each partner. Capital 1/1/09 Capital Contributions Partner Capital Net Income Drawings 12/31/09 A. Jel O. Tin $39,000 $8,000 $14,900 $16,400 $45,500 27,000 6,000 11,200 7,700 36,500
M12-16 Journalizing the Liquidation of a Partnership (Various Situations) Perform the following tasks: 1. Prepare the journal entry to record the final payments to the partners of DDT partnership assuming the liquidation scenario in M12-14. 2. Prepare the journal entries to record the allocation of
M12-15 Liquidating Partnership with Capital Deficiency For the liquidation of DDT partnership, calculate the final distribution to each partner. The partnership’s net assets have been sold, and the gain/loss has been recorded. Assume the following information and that Toobes does not pay the
M12-14 Liquidating Partnership with No Capital Deficiency For the liquidation of DDT partnership, calculate the final distribution to each partner. The partnership’s net assets have been sold, and the gain/loss has been recorded. Assume the following information: Assets Liabilities and Owners’
M12-13 Journalizing the Withdrawal of a Partner (Various Situations) Perform the following tasks: 1. Prepare the journal entry to record the withdrawal of the partner as calculated in M12-11. 2. Prepare the journal entry to record the withdrawal of the partner as calculated in M12-12.
M12-12 Calculating Bonus to Exiting Partner upon Withdrawal of Partner (Payment from Partnership) Assume the same facts as in M12-11 except that the partnership agrees to pay Owda $90,400 for her partnership interest. Calculate the bonus allocated to each remaining partner.
M12-11 Calculating Bonus to Remaining Partners upon Withdrawal of Partner (Payment from Partnership) Calculate the bonus allocated to each remaining partner upon the withdrawal of a partner in the following situation: Ima, Owda, and Hier are equal partners in a partnership. Owda decides to withdraw
M12-10 Journalizing the Admission of a Partner (Various Situations) Perform the following tasks: 1. Prepare the journal entry to record the admission of the partner as calculated in M12-8. 2. Prepare the journal entry to record the admission of the partner as calculated in M12-9.
M12-9 Admitting a Partner by Investment with Bonus to the New Partner Calculate the bonus to each of the existing partners with the admission of a new partner in the following situation: Juniper, Pine, and Fir are equal partners in a partnership. They agree to admit Pinion into the partnership.
M12-8 Admitting a Partner by Investment with Bonus to the Existing Partners Calculate the bonus to each of the existing partners with the admission of a new partner in the following situation: Juniper, Pine, and Fir are equal partners in a partnership. They agree to admit Pinion into the
M12-7 Journalizing Admission of Partner as a Purchase among Partners Dot and Dash are equal partners in the DD partnership. They agree to admit Dee into the partnership. It is agreed that Dee will pay Dot and Dash $40,000 each in exchange for one-third of each partner’s current capital balance.
M12-6 Preparing Partners’ Capital Statement A. Jel and O. Tin are partners in the Jel N Tin Partnership. Using the following information, prepare a partners’ capital statement on December 31, 2009. Capital 1/1/09 Capital Contributions Net Income (allocated) Partner Drawings A. Jel $39,000
M12-5 Journalizing the Division of Income (Various Situations) Perform the following tasks: 1. Prepare the journal entry to record the division of income made in M12-3. 2. Prepare the journal entry to record the division of income made in M12-4.
M12-4 Dividing Income When Allocation Exceeds Net Income Use the same facts as in M12-3 except that Blaine Partnership earned $14,000 this year. Calculate the amount of Blaine’s net income that will be allocated to each partner.
M12-3 Dividing of Income with Salaries, Interest, and Fixed Ratio Blaine Partnership earned $20,000 this year. The partnership agreement states that income should be allocated to Romine and Roach using the salaries to partners and interest on capital balances method. Calculate the amount of
M12-2 Dividing and Journalizing Income with Fixed Ratio Tram and Quyen share income and loss based on a fixed ratio of 5/8 and 3/8, respectively. Net income for the current year is $24,000. Determine the amount of net income allocated to each partner and prepare the corresponding journal entry to
M12-1 Journalizing Partnership Formation Prepare the journal entry that would be made for the formation of the DL Partnership given the following information: Doe invests $10,000 cash and equipment with a book value of $7,000 (cost $9,000). Lee invests $12,000 cash and inventory with a cost of
10. What is the partner return on equity for Greg assuming his average partnership equity is $62,800 and his allocated net income from the partnership is $24,000?a. 76.4 percent.b. 38.2 percent.c. 261.7 percent.d. Cannot be calculated without ending capital.
#!# 9. Which of the following is not a true statement regarding a partnership liquidation?a. All liabilities, debts, and/or other obligations of the partnership must be paid before the partners receive anything.b. The steps in the liquidation process can be performed in any sequence.c. Liquidation
7. Joe is admitted into a partnership with Jack and Jill. Joe invests $25,000 into the partnership in exchange for a $22,000 capital account balance. This transaction is referred to as:a. A purchase among partners with a bonus to the new partner.b. A purchase among partners with a bonus to the
6. A partnership has four partners who share income/loss on an 8:4:3:1 ratio according to the partnership agreement. Assuming the partnership has net income of $20,000, how much will be allocated to each partner, respectively?a. $8,000, $4,000, $3,000, and $1,000.b. $10,000, $5,000, $3,750, and
5. Which of the following is not a true statement regarding partnership formation?a. The partner’s capital account is credited for the amount of assets invested.b. Partners can invest any combination of assets and/or liabilities into the partnership.c. Partnership investments are recorded at the
4. To accurately keep track of income and/or loss for individual partners, which of the following is not required for partnership accounting?a. Provisions for the addition or withdrawal of a partner.b. A drawings account for each partner.c. A capital account for each partner.d. An allocation of the
3. The limited liability company (LLC) has become a favorite entity choice of businesses meeting all of the following criteria except:a. The business has plans for significant growth.b. All members are active participants in a small local business.c. The business will have one to three members.d.
2. Which of the following is a disadvantage of the limited liability company form of business?a. Ease of formation.b. Limited liability.c. Simplified recordkeeping.d. Limited corporate characteristics.
1. Which of the following is not a disadvantage of the partnership form of business?a. Mutual agency.b. Pass-through taxation.c. Unlimited liability.d. Limited life.
19. What is one thing that can cause partner ROE to increase?
18. If a capital deficiency exists upon the liquidation of a partnership, what are two possible resolutions to the situation?
17. What are the four steps in the liquidation process?
16. A dissolution is the same as a liquidation. Do you agree with this statement? Why or why not?
15. When a partner withdraws, why might the partnership give a bonus to the withdrawing partner?
14. When a new partner is admitted using the investment of additional assets method and the existing partners’ capital accounts are debited, do the existing partners or the new partner receive a bonus?
13. When a new partner is admitted using the purchase among partners method, who is (are) the other party(ies) to the transaction?
12. List three ways that the fixed ratio for dividing partnership profits and losses can be expressed.
11. What amount is used to record partner investments into the partnership?
10. List the three things necessary for partnership accounting.
9. List the four characteristics of a corporation used to evaluate a limited liability company (LLC). What is the maximum number of these characteristics that a limited liability company can possess without risking its status as an LLC? Explain.
8. What is double taxation? Which form of business is subject to double taxation?
7. List the two documents often required to form a limited liability company (LLC). Which is always a requirement and which is often simply a recommended document?
6. Define limited liability company (LLC). Why is this new form of business so popular?
5. What are the essential elements of a partnership agreement? Is this a required document? Why or why not?
4. What is mutual agency? Is it considered an advantage or disadvantage of a partnership? Why?
3. Define unlimited liability and limited liability. Which would you prefer if you were starting a new business? Explain.
2. List at least two advantages and at least two disadvantages of a partnership.
1. What is a partnership?
CP11-6 Evaluating Effects on Current Ratio: Critical Thinking Assume you work as an assistant to the chief financial officer (CFO) of Fashions First, Inc. The CFO reminds you that the fiscal year-end is only two weeks away and that he is looking to you to ensure the company complies with its loan
CP11-5 Making Ethical Decisions: A Mini Case Upon reviewing your company’s accounting records, you discovered that several customer accounts have credit balances instead of debit balances. Your investigation revealed that these customers had paid their balances but later were dissatisfied with
CP11-4 Making Ethical Decisions: A Real-Life Example A few months ago, you were approached by a charming, young entrepreneur named Barry who had dreams of creating the world’s largest carpet cleaning company. He said his business had really taken off, which he backed up with financial statements
CP11-3 Examining an Annual Report: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry with each member selecting a different company. (See CP1-3 in
CP11-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s Companies in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e . Required: 1. Calculate, to
CP11-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases and Projects section of the text’s Web site at www.mhhe.com/LLPW1e . Required: Calculate, to two decimal places, the
PB11-5 Journalizing Transactions, Evaluating Current Ratio Effects, and Reporting Liabilities (Comprehensive Problem) The Rosa Shell Tennis Center completed the following transactions in August 2009. (a) On August 1, sold 12-month memberships and received $128,400, which included $8,400 in sales
PB11-4 Determining Financial Statement Reporting of Contingent Liabilities Brunswick Corporation is a multinational company that manufactures and sells marine and recreational products. A prior annual report contained the following information:Required: What are the alternative ways in which
PB11-3 Recording and Reporting Unearned Revenue and Payroll On December 1, 2009, Sandler Company collected rent of $3,600, for office space rented to another business. The rent collected was for three months from December 1, 2009, to February 28, 2010. Sandler also reported the following

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