Answers and Solutions To Exercises and Problemsofpartnership

DANICA V.
ESPONILLA BSA 1-17
Vocabulary Review
Here is a list of the words and
terms for this chapter:
account form balance sheet partnership

deficit profit-loss
ratio
liquidation realization
mutual agency unlimited liability
Fill in the blank with the correct word or term from the list.
1. The total process of going out of business is LIQUIDATION.

2. A/an PARTNERSHIP is an association of two or more
competent persons who agree to do business as co-
owners for profit.
3. The ability of each partner, acting as an agent of
the business, to enter into and bind it to contracts
within the apparent scope of the business is MUTUAL
AGENCY.
4. REALIZATION is the conversion of noncash assets to cash.
5. The method used by the partners to divide profits or losses in
the PROFIT-LOSS RATIO.
6. A/an DEFICIT is an abnormal balance in a capital account.
7. The principle that each partner is personally liable
for the debts of the business is called UNLIMITED
LIABILITY.
8. ACCOUNT FROM BALANCE SHEET shows the three major
categories—assets, liabilities, and owner’s equity—
in a horizontal manner.
Match the words and terms on the left with the definitions on
the right.
9. account form a. the method used by the

balance sheet (H) partners to divide profits
10. Deficit (D) or losses
11. Liquidation (F) b. each partner is personally
liable for the debts of the
12. mutual agency (G) business
13. partnership (C) c. an association of two or
14. profit-loss ratio more competent persons who
(A) agree to do business as
15. realization (E) co-owners for profit
16. unlimited d. an abnormal balance in a capital
liability (B) account
e. the conversion of noncash assets
to cash
f. the total proces of going out of
business
g. the ability of each partner,
acting as an agent of the
business, to enter into and
bind it to contracts within
the apparent scope of the
partnership
h. the format of a balance sheet
that shows the assets,
liabilities, and owners’
equity in a horizontal manner
EXERCISES
EXERCISE 14.1
Morton and Long plan to enter into a law partnership,

investing $30,000 and $20,000, respectively. They have
agreed on everything but how to divide the profits.
Calculate each partner’s share of the profit under each of
the following independent assumptions.
a. If the first year’s net income is $50,000 and they

cannot agree, how should the profits be divided?
Amounts Originally Invested.

Morton $ 30,000
Long 20,000
Total $50,000
Profits to Total
Ratio be Alloca
Divided ted
30,000 3
Morton = × $50,00 = $30,000
120,000 5
0
20,000 2
Long = × 50,000 = 20,000
120,000 5
Total to be allocated $50,000
b. If the partners agree to share net income according to

their investment ratio, how should the $50,000 be
divided?
MORTON – 3/5
LONG - 2/5
Profits
to be Total
FractIo Divide Allocated
n
d
MORTON 3/5 × $50,000 = $30,000

LONG 2/5 × $50,000 = 20,000
$50,000
Total
c. If the owners agree to share net income by granting
10 percent interest on their original investments,
giving salary allowances of $10,000 each, and
dividing the remainder equally, how should the
$50,000 be divided?
SHARE TO Share
MORTON to Total
LONG
Total Amount to Be $50,000
Divided
10% Interest $ 3,000 $ 2000 –
5,000
Balance $45,000
Salary Allowance 10,000 10,000 –
20,000
Balance 25,000
Remainder Divided by 12,500 –
2 12,500 25,000
EXERCISE 14.2 Totals $25,500 $24,500 0
Assume Morton and Long from Exercise 14.1 use method c to

divide profits and net income is $20,000. How should the
income be divided?
Share
Share to
to Total
MORTON
LONG
Total Amount to Be
$20,000
Divided
10% Interest $ 3000 $ 2000 – 5,000
Balance $15,000
Salary Allowance 10,000 10,000 – 20,000
Deficit Balance $(5,000)
Deficit Distributed (2500) (2500) +5,000
Totals $ 10,500 $ 10,500 0
EXERCISE 14.3
After a number of years, Long, from Exercise 14.1, decided
to go with a large law firm and wishes to sell his
interest to Brown. Long’s equity at this time is $35,000.
Morton agrees to take Brown as a partner, and Long sells
his interest to Brown for $40,000. Prepare the general
journal entry on December 31, 20XX to record the sale of
Long’s interest to Brown.
GENERAL JOURNAL PAGE
POST
DATE DESCRIPTION REF. DEBIT CREDIT
20XX
DEC. 31 LONG, Capital 3 5 0 0 0 00
BROWN, Capital 3 5 0 0 0 00
To Record the Transfer of Long’s
Equity
in the Partnership to Brown
EXERCISE 14.4
Smith, White, and Saint are partners owning the Book Nook.
The equities of the partners are $60,000, $50,000, and
$40,000, respectively. They share profits and losses equal-
ly. White wishes to retire on May 31, 20XX. Prepare the
general journal entries to record White’s retirement under
each independent assumption.
a. White is paid $50,000 in partnership cash.
POST
20XX
DEC. 31 WHITE, Capital 5 0 0 0 0 00
Cash 5 0 0 0 0 00
To Record the Withdrawal of White
who
Receives Cash Equal to Her Equity
b. White is paid $40,000 in partnership cash.

GENERAL JOURNAL Page
POST
20XX
Cash 4 0 0 0 0 00
SMITH, Capital 5 0 0 0 00
SAINT, Capital 5 0 0 0 00
To Record the Withdrawal of
Abdullah who
Receives Cash Less Than Her Equity
c. White is paid $55,000 in partnership cash.

POST
20XX
SMITH, Capital 5 0 0 0 00
SAINT, Capital 5 0 0 0 00
Cash 5 5 0 0 0 00
To Record the Withdrawal of WHITE
who
Receives Cash Less Than his Equity
EXERCISE 14.5
Hall and Mason share profits and losses equally and have capital
balances of $60,000 and
$40,000, respectively. Taylor is to be admitted on January
2, 20XX, and is to receive a one-third interest in the
firm. Prepare the general journal entries to record the
addition of Taylor as a partner under the following
unrelated circumstances.
a. Taylor invests $50,000.
Equities of the present partners $100,000

Investment of the new partner 50,000
Total equities of the new 150,000
partnership
Equity of Knight (1/3 × $150,000) $ 50,000

POST
20XX
31 Cash 5 0 0 0 0 00
DEC.
Taylor, Capital 5 0 0 0 0 00
To Record the Addition of Knight
as a
Partner with a One-third Interest
b. Taylor invests $62,000.

partnership
Equity of Knight (1/3 × $162,000) $ 54,000

POST
20XX
DEC. 31 Cash 6 2 0 0 0 00
HALL, Capital 4 0 0 00
MASON, Capital 0 0 00
4
TAYLOR, Capital 5 4 0 0 0 00
To Record the Addition of Taylor as
Partner with a One-Third Interest
c. Taylor invests $47,000.

partnership
Equity of Knight (1/3 × $147,000) $ 49,000

POST
20XX
Dec. 31 Cash 4 7 0 0 0 00
HALL, Capital 1 0 0 0 00
MASON, Capital 1 0 0 0 00
Taylor, Capital 4 9 0 0 0 00
To Record the Addition of Taylor
as a
Partner with a One-third Interest
EXERCISE 14.6
Martin, Pearson, and Henderson are partners sharing
profits and losses in a 2:1:1 ratio. Their capital balances
are $30,000, $25,000, and $20,000, respectively. Because of
an eco- nomic turndown, they have decided to liquidate.
After all assets are sold and the creditors paid, $43,000
cash remains in the business chequing account.
a. Determine the amount of their losses by using the accounting
equation.
ASSET = LIABILITIES + CAPITAL

ASSET = LIABILITIES + (Capital Invested - Loss)
43000 = 0 + (30000 + 25000 + 20000 – loss)
43000 = 75000 – Loss
Loss = 32000
b. Using the profit-loss ratio, determine the amount of

loss to be distributed to each partner, and determine
their new capital balances.
Amount of loss
Cash + = + Pearson, Henderson,
Other Liabilities Martin, Capital Capital
Assets Capital
30,000 25,000 20,000
Share (16,000) (8,000) (8,000)
in loss
Capital 43,000 14,000 17,000 12,000
Balance
c. Determine the amount of cash each partner will receive in the

final distribution.
FINAL DISTRIBUTION OF CASH
REMAINING CASH X PROFIT-LOSS RATIO
Martin: 43,000 x ¼ = 21,500

Pearson: 43,000 x ¼ = 10,750
Henderson: 43,000 x ¼ = 10,750
EXERCISE 14.7
Baker, Marshall, and Perryman share profits and losses
equally and begin their business with investments of
$20,000, $15,000, and $8,000, respectively. They have been
unprof- itable in their business venture and decide they
must liquidate. After all the assets are sold and all
debts paid, $16,000 cash remains in the business chequing
account.
a. Determine the amount of their losses by using the accounting

equation.
ASSET = LIABILITIES + CAPITAL

ASSET = LIABILITIES + (Capital Invested - Loss)
16,000 = 0 + (20,000 + 15,000 + 8,000 – loss)
16,000 = 43,000 – Loss
Loss = 43,000 – 16,000
LOSS = 27,000
b. Using the profit-loss ratio, determine the amount of

loss allocated to each partner, and determine their
new capital balances.
Amount Of Loss Allocated To Each Partner
ASSET + = + Marshall, Perryman,

Other Liabilities Baker, Capital Capital
Cash Assets Capital
Beg. 20,000 15,000 8,000

Share (27,000) (9,000) (9,000) (9,000)
in loss
Capital 16,000 11,000 6,000 (1,000)
Balance
c. C
alcul
c.Determine the amount of cash, if any, each partner

will receive under the different assumptions below.
(1) Perryman has personal assets and pays the
amount she owes to the partnership.
Cash Assets Capital
20,000 15,000 8,000

Share in (27,000) (9,000) (9,000) (9,000)
loss
Capital 16,000 11,000 6,000 (1,000)
Balance
Additional 1,000 1,000
Investment
End 17,000 11,000 6,000 0
(2) Perryman has no personal assets and does not pay the
amount she owes to the partnership.

Cash Assets Capital
20,000 15,000 8,000

Share in (27,000) (9,000) (9,000) (9,000)
loss
Capital 16,000 11,000 6,000 (1,000)
Balance
(500) (500) 1000
End 16,000 10,500 5,500 0
Problems
PROBLEM 14.1
Jones, Brady, and Bell formed a partnership making
investments of $40,000, $60,000, and $80,000, respectively.
They believe the net income from their business for the
first year will be $81,000. They are considering several
alternative methods for sharing this expected profit,
which are: (1) divide the profits equally; (2) divide the
profits according to their investment ratio; (3) divide
the profits by giving an interest allowance of 10 percent
on original investments, granting $10,000 salary allowance
to each partner, and dividing any remainder equally. Round
to the nearest dollar where required.
INSTRUCTION
a. Prepare a schedule showing distribution of net income under methods 1, 2, and
3. It should have the following headings
COMPUTATION Share to Share to Share to Total

PLAN
Jones Brady Bell Allocated
1
27,000 =
81,000/3 27,000 =
27,000 =
COMPUTATION Share to Share to Share to Total

PLAN
Jones Brady Bell Allocated
2 2
9 × 81000 18000 =
1
3 × 81000 27000 =
4
9 × 81000 36000 =
PLAN Share to Share to Share Total
3 Jones Brady to Bell Allocated
Total Amount $81,000
to Be Divided
10% Interest $ 4,000 $ 6,000 8,000 –18,000

Balance $63,000
Salary 10,000 10,000 10,000 – 30,000
Allowance
Balance 33,000
Remainder
Divided by 3 11,000 11,000 11,000 – 33,000
Totals $25,000 $27,000 $29,000 0
b. Using method 3 above, prepare a partial income statement showing the

allocation of net income to the partners (see income statement on page 384 for
example).
JONES, BRADDY, and BELL,
ACCOUNTANTS
Income Statement
For Year Ended December 31, 20XX
Net Income $ 8 1 0 0 0 00
Allocation of Net Income to the Partners:

JONES
Interest at 10% (.10 × $40,000) $ 4 0 0 0 00
Salary Allowance 1 0 0 0 0 00
1/3 of Remaining Net Income 1 1 0 0 0 00
Total $ 2 5 0 0 0 00
Loretto
Interest at 10% (.10 × $60,000) $ 6 0 0 0 00
Total $ 2 7 0 0 0 00
Abdullah
Interest at 10% (.10 × $80,000) $ 8 0 0 0 00
Total $ 2 9 0 0 0 00
Net Income Allowed $ 8 1 0 0 0 00

c. Journalize the closing of the Income Summary account on December 31, 20XX
using the information from b above.

POST
20XX
Dec. 31 Income Summary 8 1 0 0 0 00
JONES, Capital 2 5 0 0 0 00
BRADY, Capital 2 7 0 0 0 00
BELL, Capital 2 9 0 0 0 00
To Record the closing of the Income
Summary to Capital
PROBLEM 14.2
Abner, Black, and Cobb share profits and losses equally and
have capital balances of
$60,000, $50,000, and $50,000, respectively. Cobb wishes to
sell his interest and leave the business on July 31 of this
year. Cobb is to sell his interest to Williams with the
approval of Abner and Black.
Instr u c t i o n s
Prepare the general journal entries, without explanations, to record the
following independent assumptions.
a. Cobb sells his interest to Williams for $50,000.
POST
20XX
July 5 0 0 0 0 00
31 Cobb, Capital
.
Williams, Drawing 5 0 0 0 0 00
b. Cobb sells his interest to Williams for $40,000.

POST
20XX
july 31 COBB, Capital
. 5 0 0 0 0 00
ALONER, Capital 5 0 0 0 00
BLACK, Capital 5 0 0 0 00
WILLIAMS, Capital 4 0 0 0 0 00
c. Cobb decides to stay in the partnership but sell one-half of his
interest to Williams for $30,000. (Hint: What is the value of
half of Cobb’s capital account?)
POST
20XX
July 2 5 0 0 0 00
31 Cobb, Capital
.
Williams, Drawing 2 5 0 0 0 00
d. If Williams is admitted as a new partner, must a new

partnership agreement be written? Why?
Yes, because the those individuals will be having a joint

liabilities and obligations for their partnership, they are both
accountable fr the profit and loss of each other that is why
partnership agreement should be written for their agreement to be
valid
PROBLEM 14.3
Coleman and Simmons are partners and own the ABC Gift
Shop. They formed their partnership on January 2, 20XX,
with investments of $50,000 and $25,000. Simmons
invested an additional $5,000 on July 7. They share
profits giving 10 percent interest allowance on
beginning investments and dividing the remainder on a
2:1 ratio. Following is their trial balance before
closing.
Coleman and Simmons

Trial Balance
December 31, 20XX
Cash $ 1 9 0 0 0 00
Accounts Receivable 5 0 0 0 00
Merchandise Inventory 6 0 0 0 0 00
Equipment 2 0 0 0 0 00
Accumulated Amortization: Equipment $ 1 0 0 0 0 00
Accounts Payable 1 0 0 0 0 00
Coleman, Drawing 1 0 0 0 0 00
Simmons, Drawing 1 0 0 0 0 00
Coleman, Capital 5 0 0 0 0 00
Simmons, Capital 3 0 0 0 0 00
Sales 1 0 0 0 0 0 00
Operating Expenses 7 6 0 0 0 00
$ 2 0 0 0 0 0 00 $ 2 0 0 0 0 0 00
a. Prepare the general journal entries, without
explanations, to record the closing of all the
nominal accounts (revenue and expense) using the
Income Summary account.
POST
20XX
Dec. 31 Sales 1 0 0 0 0 0 00
Income Summary 1 0 0 0 0 0 00

POST
20XX
Dec. 31 Income Summary 7 6 0 0 0 0 00
Expense 7 6 0 0 0 0 00
b. Prepare a schedule showing the distribution of net

income to the partners. It should have the
following headings.
Share Share Total

to to
Calculations Coleman Simmons Allocat
ed
Share to Share to
Calculations Total
Coleman Simmons
Allocated
Total Amount to Be Divided $24,000
10% Interest $ 5,000 $ 2,500 – 7,500
Balance $16,500
Remainder Divided by 2:1 11,000 5,500 – 16,500
Totals $16,000 $8,000 0
c. Prepare the general journal entries to record the
closing of the Income Summary account to the capital
accounts, and close the drawing accounts to the
capital accounts.
POST
20XX
Dec. 31 Income Summary 2 4 0 0 0 00
Colemann, Capital 1 6 0 0 0 00
Simmons, Capital 8 0 0 0 00

POST
20XX
Dec. 31 Colemann, Capital 1 0 0 0 0 00
Simmons, Capital 1 0 0 0 0 00
Colemann, Drawing 1 0 0 0 0 00
Simmons, Drawing 1 0 0 0 0 00
d. Prepare the partnership income statement showing the

allocation of net income.
Colemann and Simmons

Income Statement
Sales $ 1 0 0 0 0 0 00
Operating Expenses 7 6 0 0 0 00
Net Income $ 2 4 0 0 0 00
Allocation of Net Income to the Partners:

Colemann
Interest at 10% (.10 × $50,000) $ 5 0 0 0 00
Total $ 1 6 0 0 0 00
Simmons
Interest at 10% (.10 × $25,000) $ 2 5 0 0 00
1/3 of Remaining Net Income 5 5 0 0 00
Total $ 8 0 0 0 00
Net Income Allowed $ 2 4 0 0 0 00

e. Prepare the statement of owners’ equity.

Statement of Changes in Partners’Equity
Colemann Simmons Totals
Capital, January 2 5 0 0 0 0 00 2 5 0 0 0 00 7 5 0 0 0 00
Add: Additional 5 0 0 0 00 5 0 0 0 00
0 00
Invest.
Add: Net Income 1 6 0 0 0 00 8 0 0 0 00 2 4 0 0 0 00
Subtotals 6 6 0 0 0 00 3 8 0 0 0 00 1 0 4 0 0 0 00
Deduct: Withdrawals (1 0 0 0 0 00) (1 0 0 0 0 00) (2 0 0 0 0 00)
Capital, December 31 5 6 0 0 0 00 2 8 0 0 0 00 8 4 0 0 0 00
f. Prepare a balance sheet.

Balance Sheet
December 31, 20XX
Assets
Cash $ 19 0 000 0
Accounts Receivable 5 0 000 0
Merchandise Inventory 60 0 000 0
Equipment 20 0 000 0
Accumulated Amortization: Equipment ( 00
$ 0 0 00
1 )
Total Assets $ 9 4 0 0 0 00
Liabilities
Accounts Payable $ 1 0 0 0 0 00
Owners’
Equity
Colemann, Capital $ 5 6 0 0 0 00
Simmons, Capital 2 8 0 0 0 00 8 4 0 0 0 00
Total Liabilities and Owner’s Equity $ 9 4 0 0 0 00
PROBLEM 14.4
Arnold, Cole, and Yamaguchi are partners, owning Pizza Plus and
sharing profits and losses in a 3:2:1 ratio. The balance sheet, presented in
account form format for this business, is as follows.
Arnold wishes to withdraw from the firm. Cole and Yamaguchi agree.
Prepare the general journal entries, without explanations, to record
the June 30 withdrawal of Arnold under the following independent
assumptions.
a. Arnold withdraws taking partnership cash of $60,000.
POST
20XX
JUNE 30 Arnold, Capital 6 0 0 0 0 00
Cash 6 0 0 0 0 00
b. Arnold withdraws taking cash of $32,000 and truck

#2 (debit Accumulated Amortization and credit
Truck).

POST
20XX
JUNE 30 Arnold, Capital 7 0 0 0 0 00
Accumulated Amortization 6 0 0 0 0 00
Cash 3 2 0 0 0 00
Truck 3 5 0 0 0 00
c. Arnold withdraws taking cash of $51,000

POST
20XX
June 30 Arnold, Capital 6 0 0 0 0 00
Cash 5 1 0 0 0 00
Cole, Capital 6 0 0 0 00
Yamaguchi, Capital 3 0 0 0 00
d. Arnold withdraws taking cash of $25,000 and a $44,000
note given by the partnership.
POST
DATE DESCRIPTI REF DEBIT CREDIT
ON .
20XX
Cole, Capital 6 0 0 0 00
Yamaguchi, Drawing 3 0 0 0 00
Cash 2 5 0 0 0 00
Notes Payable 4 4 0 0 0 00
e. Arnold withdraws taking cash of $25,000, a $20,000 note,

and truck #1.

POST
DATE DESCRIPTIO REF DEBIT CREDIT
N .
20XX
Cash 2 5 0 0 0 00
Notes Payable 2 0 0 0 0 00
Truck
1 5 0 0 0 00
PROBLEM 14.5
Garcia, Keller, and Henley are partners who share profits and
losses in a 3:1:2 ratio. Their capital account balances are
$60,000, $25,000, and $35,000, respectively. Watts is to be
admitted to the firm on March 31, 20XX with a one-fourth
interest.
Instr u c t i o n s
Prepare the general journal entries to record the following unrelated
assumptions. Omit explanations.
a. Watts is to be admitted by investing cash of $40,000.

partnership
Equity of Knight (1/4 × $160,000) $ 40,000

POST
20XX
31 Cash 4 0 0 0 0 00
Mar.
Watts, Capital 4 0 0 0 0 00
b. Watts is to be admitted by investing cash of $30,000.

partnership
Equity of Knight (1/4 × $150,000) $ 37,500

POST
20XX
Mar. 31 Cash 30 0 0 0 00
Garcia, Capital 2 5 0 0 00
Keller, Capital 2 5 0 0 00
Henley, Capital 2 5 0 0 00
c. Watts is to be admitted by investing cash of $50,000.
partnership
Equity of Knight (1/4 × $170,000) $ 42,500

POST
20XX
Mar. 31 Cash 5 0 0 0 0 00
Garcia, Capital 2 5 0 0 00
Keller, Capital 2 5 0 0 00
Henley, Capital 2 5 0 0 00
PROBLEM 14.6
Bentley, Colby, and Musharaf plan to liquidate their
partnership. They share profits and losses on a 3:2:1
ratio. At the time of liquidation, the partnership balance
sheet appears as follows:
Bentley, Colby, and
Musharaf Balance Sheet
June 30, 20XX
Asset Liabilities and Owners’ Equity
s
Liabilities
Cash $ 2 3 0 0 0 00 Accounts Payable $ 3 0 0 0 0 00
Other Assets 1 1 5 0 0 0 00
Owners’ Equity
Bentley, 4 8 0 0 0 00
Capital
Colby, Capital 3 6 0 0 0 00
Musharaf, 2 4 0 0 0 00 1 0 8 0 0 0 00
Capital
Total Liabilities
and
Total Assets $ 1 3 8 0 0 0 00 Owner’s Equity $ 1 3 8 0 0 0 00
Prepare the general journal entries, without

explanations, to record (1) the sale of the other assets;
(2) the distribution of the loss or gain on realization;
(3) the payment to the creditors; and (4) the final
distribution of cash. Each of the following are unrelated
assumptions.
a. The other assets are sold for $115,000.

POST
20XX
june 30 Cash 1 1 5 0 0 0 00
Sales from other Assets 1 1 5 0 0 0 00
Cash 3 0 0 0 0 00
Bentley, Capital 4 8 0 0 0 00
Musharaf, Capital 2 4 0 0 0 00
cash 1 0 8 0 0 0 00
b. The other assets are sold for $79,000.
POST
20XX
June 30 Cash
7 9 0 0 0 00
.
Loss or Gain on Realization 3 6 0 0 0 00
Cash 3 0 0 0 0 00
cash 1 1 5 0 0 0 00
c. The other assets are sold for $55,000.

POST
20XX
June 30 Cash
5 5 0 0 0 00
.
Cash 3 0 0 0 0 00
Musharaf, Capital 6 3 3 3 00
cash 4 0 0 0 0 00
PROBLEM 14.7
Irby, Jalisco, and Whitehorse are partners in a video
rental business, sharing profits and losses in a 2:1:1
ratio. Business has decreased due to the number of other
rental stores in their area. They decide it would be best
to liquidate. Their December 31, 20XX balance sheet
information is as follows.
Balance Sheet Information
Cash $15,000
Video Inventory 75,000
Accounts Payable 25,000
Irby, Capital 25,000
Jalisco, Capital 20,000
Whitehorse, Capital 20,000
Instr u ct i o n s
Prepare the general journal entries, without explanations, to show: (1) the
sale of the noncash assets; (2) the distribution of the losses or gains; (3) the
payment to the creditors; and (4) the final distribution of cash under each of
the following independent assumptions.
a. The video inventory is sold for $63,000.

POST
20XX
dec. 31 Cash 6 3 0 0 0 00
Other Assets 7 5 0 0 0 00
Irby, Capital 6 0 0 0 00
Jolisco, Capital 3 0 0 0 00
Whitehorse, Capital 3 0 0 0 00
Cash 2 5 0 0 0 00
Irby, Capital 1 9 0 0 0 00
Jolisco, Capital 1 7 0 0 0 00
Whitehorse, Capital 1 7 0 0 0 00
cash 5 3 0 0 0 00
b. The video inventory is sold for $25,000

POST
20XX
dec. 31 Cash 2 5 0 0 0 00
Cash 2 5 0 0 0 00
cash 1 5 0 0 0 00
c. The video inventory is sold for $20,000 and

the partner with the
deficit can and does pay from personal assets.

POST
20XX
dec. 31 Cash 2 0 0 0 0 00
Cash 2 5 0 0 0 00
cash 1 2 5 0 0 00
d. The same assumption as c above, except the partner
with the deficit cannot pay.
POST
20XX
dec. 31 Cash 2 0 0 0 0 00
Cash 2 5 0 0 0 00
cash 1 0 0 0 0 00

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DANICA V.

ESPONILLA BSA 1-17

account form balance sheet partnership

1. The total process of going out of business is LIQUIDATION.

9. account form a. the method used by the

Morton and Long plan to enter into a law partnership,

a. If the first year’s net income is $50,000 and they

Amounts Originally Invested.

Total to be allocated $50,000

b. If the partners agree to share net income according to

MORTON 3/5 × $50,000 = $30,000

Assume Morton and Long from Exercise 14.1 use method c to

b. White is paid $40,000 in partnership cash.

c. White is paid $55,000 in partnership cash.

Equities of the present partners $100,000

GENERAL JOURNAL PAGE

b. Taylor invests $62,000.

Equities of the present partners $100,000

GENERAL JOURNAL Page

Equities of the present partners $100,000

GENERAL JOURNAL Page

ASSET = LIABILITIES + CAPITAL

b. Using the profit-loss ratio, determine the amount of

c. Determine the amount of cash each partner will receive in the

FINAL DISTRIBUTION OF CASH

REMAINING CASH X PROFIT-LOSS RATIO

Martin: 43,000 x ¼ = 21,500

a. Determine the amount of their losses by using the accounting

ASSET = LIABILITIES + CAPITAL

b. Using the profit-loss ratio, determine the amount of

Amount Of Loss Allocated To Each Partner

ASSET + = + Marshall, Perryman,

Beg. 20,000 15,000 8,000

c.Determine the amount of cash, if any, each partner

20,000 15,000 8,000

ASSET + = + Marshall, Perryman,

20,000 15,000 8,000

COMPUTATION Share to Share to Share to Total

COMPUTATION Share to Share to Share to Total

10% Interest $ 4,000 $ 6,000 8,000 –18,000

b. Using method 3 above, prepare a partial income statement showing the

Allocation of Net Income to the Partners:

Net Income Allowed $ 8 1 0 0 0 00

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b. Cobb sells his interest to Williams for $40,000.

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d. If Williams is admitted as a new partner, must a new

Yes, because the those individuals will be having a joint

Coleman and Simmons

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b. Prepare a schedule showing the distribution of net

Share Share Total

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d. Prepare the partnership income statement showing the

Colemann and Simmons

Allocation of Net Income to the Partners:

Net Income Allowed $ 2 4 0 0 0 00

Colemann and Simmons

f. Prepare a balance sheet.

Colemann and Simmons

b. Arnold withdraws taking cash of $32,000 and truck

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