1101AFE Accounting Principles Workshop Chapter 13

Question 1
a. Napier and Blakely are in partnership. Their respective capital balances are $60,000 and $120,000. Determine their
profit or loss for each of the following independent situations.
i.
Loss is $85,000 and there is no written agreement
ii.
Profit is $99,000 and based on capital balances
iii.
Profit is $99,000, the first 60,000 based on capital balances, 28,000 shared Napier 70% and Blakely 30%, the rest
is shared equally
i.
ii.

iii.

b. Reilly is being admitted to the partnership of Martin and Krone. Before this admission, the partnership books show
Martins capital to be 150,000 and Krones at $75,000. Calculate each partners equity under the following
independent situations.
i.
Reilly pays Krone $95,000 for Krones equity
ii.
Reilly invests $75,000 for interest in partnership
iii.
Reilly invests $139,000 for interest in partnership
i.
ii.

iii.

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1101AFE Accounting Principles Workshop Chapter 13

Question 2
On 30th June, Madge retires from the partnership of Madge, Mary and Mona. The partner equity balances are Madge
$36,000, Mary $51,000 and Mona $22,000. The assets have been revalued to current market values. The inventory should
be decreased by $16,000 and the land should be increased by $40,000. The profit and loss ratio of the partnership has
been 4:3:3 for Madge, Mary and Mona respectively. Journalise the asset revaluations and Madges withdrawal

Question 3
On the 1st July, Blair West and Peter Williams formed a partnership. They agree to invest equal amounts of capital. West
invests his assets and liabilities as follows:
West Carrying Amounts
Accounts receivable
Inventory
Prepaid expenses
Office equipment
Accounts payable

Current Market values

17,200
32,000
2,700
55,000
29,000

17,000
34,000
2,000
37,000
29,000

On the 1st July, Williams invests cash in an amount equal to the current market value of Wests partnership capital.
Journalise the partners initial investments.

Question 4
Kent, Fleur and Merve have respective capital balances of $47,000, $70,500 and $141,000. The first $110,000 of profit is
shared based on capital balances. The next $22,000 is based on service and shared equally between Kent and Fleur. The
remainder is divided equally. Calculate each partners share of the $165,000 profit to the nearest whole $ in each situation.

Kent

Fleur

Merve

Record the journal entry to allocate profit to each partner from question above

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1101AFE Accounting Principles Workshop Chapter 13

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