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Accounting 23rd Edition Carl S. Warren - Solutions
=+• Accounts receivable amounting to $2,800 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts.
=+PR 12-3B Financial statements for partnership objs. 2, 5✔ 2. Dec. 31 capital—Forte,$87,250 Sadhil Rao and Lauren Sails have operated a successful firm for many years, sharing net income and net losses equally. Paige Hancock is to be admitted to the partnership on May 1 of the current year, in
=+1. Prepare an income statement for 2010, indicating the division of net income. The articles of partnership provide for salary allowances of $40,000 to Yamada and $50,000 to Forte, allowances of 10% on each partner’s capital balance at the beginning of the fiscal year, and equal division of
=+The ledger of Dan Yamada and Courtney Forte, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 2010:Debit Credit Balances Balances Cash 32,000 Accounts Receivable 42,300 Supplies 1,500 Land 75,000 Building 128,100 Accumulated
=+PR 12-2B Dividing partnership income obj. 2✔ 1.f. Larson net income, $41,600 570 Chapter 12 Accounting for Partnerships and Limited Liability Companiese. Interest of 12% on original investments, salary allowances of $32,000 to Larson and$64,000 to Alvarez, and the remainder equally.f. Plan (e),
=+PR 12-1B Entries and balance sheet for partnership obj. 2✔ 3. Walker net income, $36,400 Larson and Alvarez have decided to form a partnership. They have agreed that Larson is to invest $150,000 and that Alvarez is to invest $50,000. Larson is to devote one-half time to the business and Alvarez
=+3. After adjustments and the closing of revenue and expense accounts at July 31, 2011, the end of the first full year of operations, the income summary account has a credit balance of $80,000, and the drawing accounts have debit balances of $22,500(Walker) and $30,400 (King). Journalize the
=+2. Prepare a balance sheet as of August 1, 2010, the date of formation of the partnership of Walker and King.
=+1. Journalize the entries to record the investments of Walker and King in the partnership accounts.
=+PR 12-6A Statement of partnership liquidation obj. 4 Problems Series B On August 1, 2010, Jarius Walker and Rae King form a partnership. Walker agrees to invest $18,200 in cash and merchandise inventory valued at $48,800. King invests certain business assets at valuations agreed upon, transfers
=+2. Assume the partner with the capital deficiency in part (b) above declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) allocate the partner’s deficiency and (b) distribute the remaining cash.
=+b. All of the noncash assets are sold for $132,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.
=+. All of the noncash assets are sold for $290,000 in cash, the creditors are paid, and the remaining cash is distributed to the partners.
=+PR 12-5A Statement of partnership liquidation obj. 4 Chapter 12 Accounting for Partnerships and Limited Liability Companies 569 On June 3, 2010, the firm of McAdams, Cooper, and Zhang decided to liquidate their partnership. The partners have capital balances of $14,000, $84,000, and $118,000,
=+2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) allocate the partner’s deficiency and(b) distribute the remaining cash.
=+1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash.
=+PR 12-4A Admitting new partner obj. 3✔ 3. Total assets,$220,200 After the accounts are closed on September 10, 2010, prior to liquidating the partnership, the capital accounts of Kris Harken, Brett Sedlacek, and Amy Eldridge are $31,000, $5,700, and $24,500, respectively. Cash and noncash
=+3. Present a balance sheet for the new partnership as of June 1, 2010.
=+2. Journalize the additional entries to record the remaining transactions relating to the formation of the new partnership. Assume that all transactions occur on June 1.
=+c. The income-sharing ratio of Cates, Orr, and Webster is to be 2:1:1.The post-closing trial balance of Cates and Orr as of May 31 follows.Cates and Orr Post-Closing Trial Balance May 31, 2010 Debit Credit Balances Balances Cash 9,400 Accounts Receivable 21,400 Allowance for Doubtful Accounts 500
=+b. Webster is to purchase $30,000 of the ownership interest of Orr for $37,500 cash and to contribute $35,000 cash to the partnership for a total ownership equity of $65,000.
=+ Equipment is to be valued at $90,000.
=+ Merchandise inventory is to be valued at $63,870.
=+• Accounts receivable amounting to $2,000 are to be written off, and the allowance for doubtful accounts is to be increased to 5% of the remaining accounts.
=+PR 12-3A Financial statements for partnerships objs. 2, 5✔ 2. Dec. 31 capital—Weekley,$182,400 568 Chapter 12 Accounting for Partnerships and Limited Liability Companies Jordan Cates and LaToya Orr have operated a successful firm for many years, sharing net income and net losses equally.
=+3. Prepare a balance sheet as of the end of 2010.
=+2. Prepare a statement of partners’ equity for 2010.
=+PR 12-2A Dividing partnership income obj. 3✔ 1.f. Drury net income, $92,900 The ledger of Amid Moshref and Alex Weekley, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 2010:Debit Credit Balances Balances Cash 24,200 Accounts
=+For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $150,000 and (2) net income of $66,000. Present the data in tabular form, using the following columnar headings:$150,000 $66,000 Plan Drury Wilkins Drury Wilkins
=+f. Plan (e), except that Drury is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.Instructions
=+e. Interest of 10% on original investments, salary allowances of $34,000 to Drury and$17,000 to Wilkins, and the remainder equally.
=+d. Interest of 10% on original investments and the remainder in the ratio of 3:2.
=+PR 12-1A Entries and balance sheet for partnership obj. 2✔ 3. Schmidt net income, $47,200 Chapter 12 Accounting for Partnerships and Limited Liability Companies 567 Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $20,000 and that Wilkins
=+3. After adjustments and the closing of revenue and expense accounts at May 31, 2010, the end of the first full year of operations, the income summary account has a credit balance of $84,000, and the drawing accounts have debit balances of $30,000(Schmidt) and $25,000 (Cohen). Journalize the
=+2. Prepare a balance sheet as of June 1, 2009, the date of formation of the partnership of Schmidt and Cohen.
=+1. Journalize the entries to record the investments of Schmidt and Cohen in the partnership accounts.
=+The partnership agreement includes the following provisions regarding the division of net income: interest of 10% on original investments, salary allowances of $36,000(Schmidt) and $22,000 (Cohen), and the remainder equally.Instructions
=+Balance Balance Accounts Receivable $18,400 $14,900 Allowance for Doubtful Accounts 800 1,000 Merchandise Inventory 21,400 28,600 Equipment 36,000 35,000 Accumulated Depreciation—Equipment 12,000 Accounts Payable 6,500 6,500 Notes Payable 4,000 4,000
=+EX 12-28 Revenue per employee Problems Series A On June 1, 2009, Kevin Schmidt and David Cohen form a partnership. Schmidt agrees to invest $12,000 cash and merchandise inventory valued at $32,000. Cohen invests certain business assets at valuations agreed upon, transfers business liabilities,
=+Revenues (in thousands) $38,500 $33,750 Number of employees (excluding members) 350 250a. For 2009 and 2008, determine the revenue per employee (excluding members).b. Interpret the trend between the two years.
=+EX 12-27 Revenue per professional staff Office-Brite Cleaning Services, LLC, provides cleaning services for office buildings. The firm has 10 members in the LLC, which did not change between 2008 and 2009. During 2009, the business expanded into four new cities. The following revenue and employee
=+Revenue (in millions) $ 9,850 $ 8,770 Number of professional staff (including partners) 32,483 29,614a. For 2007 and 2006, determine the revenue per professional staff. Round to the nearest thousand dollars.b. Interpret the trend between the two years.
=+ 12-26 Partnership entries and statement of partners’ equity objs. 2, 5✔b. Abdel-Raja, capital, Dec. 31,$114,000 566 Chapter 12 Accounting for Partnerships and Limited Liability Companies The accounting firm of Deloitte & Touche is the largest international accounting firm in the world as
=+b. Prepare a statement of partners’ equity for the current year for the partnership of Abdel-Raja and Meyer.
=+a. Journalize the entries to close (1) the income summary account and (2) the drawing accounts.
=+EX 12-25 Statement of LLC liquidation obj. 4 The capital accounts of Hossam Abdel-Raja and Aly Meyer have balances of $90,000 and $65,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Abdel-Raja invested an additional $10,000. During the year,
=+b. Provide the journal entry for the final cash distribution to members.
=+a. Prepare a statement of LLC liquidation.
=+EX 12-24 Statement of partnership liquidation obj. 4 Gordon, Hightower, and Mills are members of Capital Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members’ equity prior to liquidation and asset
=+EX 12-23 Liquidating partnerships—capital deficiency obj. 4 After closing the accounts on July 1, prior to liquidating the partnership, the capital account balances of Dover, Goll, and Chamberland are $35,000, $50,000, and $22,000, respectively. Cash, noncash assets, and liabilities total
=+EX 12-22 Distribution of cash upon liquidation obj. 4✔a. Houston, $380 Hilliard, Downey, and Petrov are partners sharing income 3:2:1. After the firm’s loss from liquidation is distributed, the capital account balances were: Hilliard, $24,000 Dr.;Downey, $90,000 Cr.; and Petrov, $64,000 Cr.
=+b. Assuming that the partnership has only $540 instead of $1,020, do any of the three partners have a capital deficiency? If so, how much?
=+a. How should the money be distributed?
=+EX 12-21 Liquidating partnerships—capital deficiency obj. 4✔b. $72,500 Chapter 12 Accounting for Partnerships and Limited Liability Companies 565 Bianca Houston, Jana Alsup, and KeKe Cross arranged to import and sell orchid corsages for a university dance. They agreed to share equally the
=+c. Journalize the transaction that must take place for Matthews and Williams to receive cash in the liquidation process equal to their capital account balances.
=+b. What is the amount of cash on hand?
=+a. What term is applied to the debit balance in Shen’s capital account?
=+EX 12-20 Distribution of cash upon liquidation obj. 4✔ Bradley, $33,500 claim is to be paid in cash. Cohen and Cobb are to share equally in the net income or net loss of the new partnership.Journalize the entries to record (a) the adjustment of the assets to bring them into agreement with
=+EX 12-19 Distribution of cash upon liquidation obj. 4✔a. $4,000 loss Jason Bradley and Abdul Barak, with capital balances of $26,000 and $35,000, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $76,000 of cash
=+c. How should the cash be divided between Pryor and Lester?
=+b. How should the gain or loss be divided between Pryor and Lester?
=+a. What is the amount of a gain or loss on realization?
=+EX 12-18 Statement of members’ equity, admitting new member objs. 2, 3, 5✔a. 3:7 Pryor and Lester are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $12,000 and $8,000, respectively. After all noncash
=+e. What percentage interest of Yellow Mountain Mines did Randy Reed acquire?
=+d. Why do the member equity accounts of Nevada Properties, LLC, and Star Holdings, LLC, have positive entries for Randy Reed’s contribution?
=+c. How much cash did Randy Reed contribute to Yellow Mountain Mines, LLC, for his interest?
=+b. What was the income-sharing ratio in 2011?
=+a. What was the income-sharing ratio in 2010?
=+EX 12-17 Withdrawal of partner obj. 3 564 Chapter 12 Accounting for Partnerships and Limited Liability Companies The statement of members’ equity for Yellow Mountain Mines, LLC, is shown below.Yellow Mountain Mines, LLC Statement of Members’ Equity For the Years Ended December 31, 2010 and
=+EX 12-16 Partner bonuses, statement of partners’ equity objs. 2, 3, 5✔ Wilson capital, Dec. 31, 2010,$83,400 Luke Gilbert is to retire from the partnership of Gilbert and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the
=+Prepare a statement of partnership equity for the year ended December 31, 2010.
=+3. The partners’ withdrawals are equal to half of the increase in their capital balances from income.
=+2. Net income of $160,000 was earned in 2010. In addition, Jen Wilson received a salary allowance of $30,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Holden.
=+1. In early January, Jaime Holden is admitted to the partnership by contributing$25,000 cash for a 20% interest.
=+EX 12-15 Admitting new partner with bonus obj. 3✔b. (1) Bonus paid to Harris, $6,200 The partnership of Angel Investor Associates began operations on January 1, 2010, with contributions from two partners as follows:Jen Wilson $45,000 Teresa McDonald 55,000 The following additional partner
=+1. Harris purchased a 20% interest for $50,000.2. Harris purchased a 30% interest for $125,000.
=+b. Provide the journal entry for Harris’s admission under the following independent situations:
=+2. Koster purchased a 25% interest in Excel Medical, LLC, for $160,000.
=+1. Koster purchased a 30% interest in Excel Medical, LLC, for $310,000.
=+b. Provide the journal entry for the bonus under the following independent situations:
=+a. Provide the journal entry for the asset revaluation.
=+EX 12-13 Admitting new partner who contributes assets obj. 3✔b. Flores,$60,000 Excel Medical, LLC, consists of two doctors, Douglass and Finn, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Lindsey Koster has been asked to join the LLC. Prior to admitting
=+EX 12-12 Admitting new partners who buy an interest and contribute assets obj. 3✔b. Hughes,$96,000 Chapter 12 Accounting for Partnerships and Limited Liability Companies 563 After the tangible assets have been adjusted to current market prices, the capital accounts of Travis Harris and Keelyn
=+b. What are the capital balances of each partner after the admission of the new partners?
=+EX 12-11 Admitting new partners obj. 3 The capital accounts of Brad Hughes and Mitchell Isaacs have balances of $120,000 and$100,000, respectively. Leah Craft and Jayme Clark are to be admitted to the partnership. Craft buys one-fifth of Hughes’s interest for $30,000 and one-fourth of
=+c. Why might the amount to be contributed by a new partner for admission to the firm exceed the amount determined in (b)?
=+EX 12-10 Admitting new partners obj. 3 The public accounting firm of Grant Thornton LLP disclosed U.S. revenues of $940 million for a recent year. The revenues were attributable to 489 active partners.a. What was the average revenue per partner? Round to the nearest $1,000.b. Assuming that the
=+EX 12-9 Partner income and withdrawal journal entries objs. 2, 3 Lia Wu and Becca Sims are partners who share in the income equally and have capital balances of $150,000 and $62,500, respectively. Wu, with the consent of Sims, sells onethird of her interest to Kara Oliver. What entry is required
=+. Provide the journal entry to close the drawing account at the end of the year.
=+b. Provide the journal entry to close the income summary account at the end of the year.
=+ 12-8 Dividing LLC net income and statement of members’ equity objs. 2, 5✔a. Wilson,$268,600 The notes to the annual report for KPMG LLP (U.K.) indicated the following policies regarding the partners’ capital:The allocation of profits to those who were partners during the financial year
=+c. Prepare a statement of members’ equity for 2010.
=+b. Prepare the journal entry to close the net income and withdrawals to the individual member equity accounts.
=+a. Determine the division of income among the three members.
=+EX 12-7 Dividing LLC income obj. 2✔a. Bowman,$106,800 562 Chapter 12 Accounting for Partnerships and Limited Liability Companies Intermedia, LLC, has three members: WYXT Partners, Lindsey Wilson, and Daily Sun Newspaper, LLC. On January 1, 2010, the three members had equity of $200,000,$50,000,
=+b. Provide journal entries to close the (1) income summary and (2) drawing accounts for the two members.
=+a. Determine the division of $188,000 net income for the year.
=+EX 12-6 Negotiating incomesharing ratio obj. 2 Bonds obtained appraised values for the land and equipment as follows:Land $250,000 Equipment 21,000 An analysis of the accounts receivable indicated that the allowance for doubtful accounts should be increased to $6,000.Journalize the
=+Can you identify any flaws in the partners’ reasoning regarding the incomesharing ratio?
=+At the end of the first year of operations, the two partners disagreed on the division of net income. Jasmine reasoned that the division should be equal. Although she devoted only one-half time to the business, she contributed all of the startup funds. Dawn reasoned that the income-sharing ratio
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