We at Accounting Assignments Help provide ACC401 Advanced Accounting WileyPlus Assignment 1 Help with step by step calculation and explanation 24*7 from our accounting experts.
Question-1
Jones, Silva, and Thompson form a partnership and agree to allocate income equally after recognition of 10% interest on beginning capital balances and monthly salary allowances of $1,980 to Jones and $1,500 to Thompson. Capital balances on January 1 were as follows:
| Jones | $40,300 |
| Silva | $25,200 |
| Thompson | $30,100 |
Calculate the net income (loss) allocation to each partner under each of the following independent situations.
- Net income for the year is $99,320.
- Net income for the year is $38,180.
- Net loss for the year is $14,830.
Question-2
Hill, Jones, and Vose have been partners throughout 2016. Their average balances for the year and their balances at the end of the year before closing the nominal accounts are as follows:
| Partner | Average Balances | Balances 12/31/2016 |
| Hill | $97,200 | $70,600 |
| Jones | $27,100 | $22,000 |
| Vose | $14,300 | $11,800* |
*Debit balance.
The income for 2016 is $109,100 before charging partners’ salary allowances and before payment of interest on average balances at the agreed rate of 5% per annum. Annual salary allocations are $11,900 to Hill, $9,500 to Jones, and $8,700 to Vose. The balance of income is to be allocated at the rate of 60% to Hill, 10% to Jones, and 30% to Vose.
It is intended to distribute cash to the partners so that, after credits and allocations have been made as indicated in the preceding paragraph, the balances in the partners’ accounts will be proportionate to their residual profit-sharing ratios. None of the partners is to invest additional cash, but they wish to distribute the lowest possible amount of cash.
Prepare a schedule of partners’ accounts, showing balances at the end of 2016 before closing, the allocations of the net income for 2016, the cash distributed, and the closing balances.
Question-3
Phil Phoenix and Tim Tucson are partners in an electrical repair business. Their respective capital balances are $89,400 and $49,100, and they share profits and losses equally. Because the partners are confronted with personal financial problems, they decided to admit a new partner to the partnership. After an extensive interviewing process they elect to admit Don Dallas into the partnership.
Prepare the journal entry to record the admission of Don Dallas into the partnership under each of the following conditions:
- Don acquires one-fourth of Phil’s capital interest by paying $31,200 directly to him.
- Don acquires one-fifth of each of Phil’s and Tim’s capital interests. Phil receives $25,300 and Tim receives $15,200 directly from Don.
- Don acquires a one-fifth capital interest for a $57,900 cash investment in the partnership. Total capital after the admission is to be $196,400.
- Don invests $39,280 for a one-fifth interest in partnership capital. Implicit goodwill is to be recorded.
Question-4
Bill and Jane share profits and losses in a 70:30 ratio. Mike is to be admitted into a partnership upon the investment of $12,600 for a one-third capital interest. Account balances for Bill and Jane on June 30, 2014 just before the admission of Mike are as follows:
| Debit | Credit | |
| Cash | $5,800 | |
| Accounts Receivable | $10,000 | |
| Notes Receivable | $1,800 | |
| Merchandise Inventory | $13,200 | |
| Prepaid Insurance | $600 | |
| Accounts Payable | $11,600 | |
| Bill, Capital | $11,700 | |
| Jane, Capital | $8,100 | |
| $31,400 | $31,400 |
It is agreed that for purposes of establishing the interests of the former partners, the following adjustments shall be made:
- An allowance for doubtful accounts of 2% of the accounts receivable is to be established.
- The merchandise inventory is to be valued at $11,100.
- Accrued expenses of $700 are to be recognized.
- Prepaid insurance is to be valued at $360. 5. The goodwill method is to be used to record the admission of Mike.
Prepare the entries to adjust the account balances in establishing the interests of Bill and Jane and to record the investment by Mike.
Question-5
Jon and Joe formed a partnership on July 1, 2016, and invested the following assets:
| Jon | Joe | |
| Cash | $65,200 | $126,200 |
| Realty | $248,600 |
The realty was subject to a mortgage of $24,900, which was assumed by the partnership. The partnership agreement provides that Jon and Joe will share profits and losses in the ratio of one third and two-thirds, respectively. Joe’s capital account at July 1, 2016, should be
- $349,900
- $374,800
- $366,500
- $284,700
On July 1, 2016, Mary and Jane formed a partnership, agreeing to share profits and losses in the ratio of 4:6, respectively. Mary invested a parcel of land that cost her $40,200. Jane invested $49,600 cash. The land was sold for $60,300 on July 1, 2016, four hours after formation of the partnership. How much should be recorded in Mary’s capital account on formation of the partnership?
- $20,100
- $24,120
- $8,040
- $60,300
The partnership agreement of Tami, Julie, and Kim provides for annual distribution of profit or loss in the following order:
Tami, the managing partner, receives a bonus of 15% of profit.
Each partner receives 10% interest on average capital investment.
Residual profit or loss is divided equally.
The average capital investments for 2016 were:
Tami $99,600
Julie 201,900
Kim 302,300
How much of the $94,700 partnership profit for 2016 should be allocated to Tami?
- $30,870
- $14,205
- $9,960
- $20,190
Tom and Jim are partners who share profits and losses in the ratio of 3:2, respectively. On August 31, 2016, their capital accounts were as follows:
| Tom | $79,700 |
| Jim | $49,600 |
| $129,300 |
On that date they agreed to admit John as a partner with a one-third interest in the capital and profits and losses, for an investment of $50,500. The new partnership will begin with a total capital of $179,100. Immediately after John’s admission, what are the capital balances of the partners?
- Tom – $74,180; Jim – $45,920; John – $59,700
- Tom – $73,567; Jim – $46,533; John – $59,700
- Tom – $79,700; Jim – $49,600; John – $50,500
- Tom – $59,700; Jim – $59,700; John – $59,700
On June 30, 2016, the balance sheet for the partnership of Al, Carl, and Paul, together with their respective profit and loss ratios, were as follows:
| Assets, at Cost | $179,900 |
| Al, Loan | $9,000 |
| Al, Capital (20%) | $41,700 |
| Carl, Capital (20%) | $38,600 |
| Paul, Capital (60%) | $90,600 |
| Total | $179,900 |
Al has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of $221,100 at June 30, 2016. It was agreed that the partnership would pay Al $60,900 cash for Al’s partnership interest, including Al’s loan, which is to be repaid in full. No goodwill is to be recorded. After Al’s retirement, what is the balance of Carl’s capital account?
- $46,840
- $36,350
- $38,600
- $46,350
Question-6
Kazma, Folkert, and Tucker are partners with capital account balances of $28,000, $73,800, and $48,200, respectively. Income and losses are divided in a 4:4:2 ratio. When Tucker decided to withdraw, the partnership revalued its assets from $241,000 to $267,700, which represented an increase in the value of inventory of $8,600 and an increase in the value of land of $18,100. Tucker was then given $13,900 cash and a note for $41,500 for his withdrawal from the partnership.
- Prepare the journal entry to record the revaluation of the partnership’s assets.
- Prepare the journal entry to record the withdrawal using the following independent methods.
-
- Bonus.
- Partial goodwill.
- Full goodwill amount
Question-7
Dave, Brian, and Paul are partners in a retail appliance store. The partnership was formed January 1, 2014, with each partner investing $42,800. They agreed that profits and losses are to be shared as follows:
- Divided in the ratio of 40:30:30 if net income is not sufficient to cover salaries, bonus, and interest.
- A net loss is to be allocated equally.
- Net income is to be allocated as follows if net income is in excess of salaries, bonus, and interest.
(a) Monthly salary allowances are:
- Dave $3,800
- Brian 2,400
- Paul 1,600
(b) Brian is to receive a bonus of 8% of net income before subtracting salaries and interest, but after subtracting the bonus.
(c) Interest of 10% is allocated based on the beginning-of-year capital balances.
(d) Any remainder is to be allocated equally. Operating performance and other capital transactions were as follows.
Prepare a schedule of changes in partners’ capital accounts for each of the three years.
Question-8
The partnership of Cain, Gallo, and Hamm engaged you to adjust its accounting records and convert them uniformly to the accrual basis in anticipation of admitting Kerns as a new partner. Some accounts are on the accrual basis and some are on the cash basis. The partnership’s books were closed at December 31, 2014, by the bookkeeper, who prepared the general ledger trial balance that appears as follows:
| Cain, Gallo, and Hamm Partnership | ||
| General Ledger Trial Balance | ||
| December 31, 2014 | ||
| Debit | Credit | |
| Cash | $13,500 | |
| Accounts Receivable | $39,000 | |
| Inventory | $32,800 | |
| Land | $9,500 | |
| Buildings | $45,400 | |
| Allowance for Depreciation of Buildings | $5,700 | |
| Equipment | $53,100 | |
| Allowance for Depreciation of Equipment | $5,400 | |
| Goodwill | $4,800 | |
| Accounts Payable | $49,500 | |
| Allowance for Future Inventory Losses | $7,200 | |
| Cain, Capital | $37,600 | |
| Gallo, Capital | $63,700 | |
| Hamm, Capital | $29,000 | |
| Prepaid Insurance | ||
| Advances from Customers | ||
| Allowance for Doubtful Accounts | ||
| $198,100 | $198,100 | |
Your inquiries disclose the following:
- The partnership was organized on January 1, 2013. No provision was made in the partnership agreement for the allocation of partnership profits and losses. During 2013, profits were allocated equally among the partners. The partnership agreement was amended, effective January 1, 2014, to provide for the following profit and loss ratio: Cain, 40%; Gallo, 40%; and Hamm, 20%. The amended partnership agreement also stated that the accounting records were to be maintained on the accrual basis and that any adjustments necessary for 2013 should be allocated according to the 2013 profit allocation agreement.
- The following amounts were not recorded as prepayments or accruals.
| 31-Dec | ||
| 2014 | 2013 | |
| Prepaid insurance | $700 | $900 |
| Advances from customers | $800 | $1,600 |
| Accrued interest expense | $500 | |
The advances from customers were recorded as sales in the year the cash was received.
3. In 2014, the partnership recorded a provision of $7,200 for anticipated declines in inventory prices. You convinced the partners that the provision was unnecessary and should be removed from the books.
4. The partnership charged equipment purchased for $4,100 on January 1, 2014, to expense. This equipment has an estimated life of 10 years and an estimated salvage value of $500. The partnership depreciates its capitalized equipment using the declining balance method at twice the straight-line depreciation rate.
5. The partners agreed to establish an allowance for doubtful accounts at 2% of current accounts receivable and 5% of past-due accounts. At December 31, 2013, the partnership had $58,900 of accounts receivable, of which only $4,300 was past due. At December 31, 2014, 20% of accounts receivable was past due, of which $4,300 represented sales made in 2013 and was considered collectible. The partnership had written off uncollectible accounts in the year the accounts became worthless as follows:
| Accounts Written Off In | ||
| 2014 | 2013 | |
| 2014 accounts | $700 | |
| 2013 accounts | $900 | $300 |
| Accrued interest expense | $500 | |
6. Goodwill was recorded on the books in 2014 and credited to the partners’ capital accounts in the profit and loss ratio in recognition of an increase in the value of the business resulting from improved sales volume. The partners agreed to write off the goodwill before admitting the new partner.
Prepare a worksheet showing the adjustments and the adjusted trial balance for the partnership on the accrual basis at December 31, 2014. All adjustments affecting income should be made directly to partners’ capital accounts. (Do not prepare formal financial statements or formal journal entries.)
Question-9
The CAB Partnership, although operating profitably, has had a cash flow problem. Unable to meet its current commitments, the firm borrowed $35,000 from a bank giving a long-term note. During a recent meeting, the partners decided to obtain additional cash by admitting a new partner to the firm. They feel that the firm is an attractive investment, but that proper management of their liquid assets will be required. Meyers agrees to invest cash in the firm if her chief accountant can review the accounting records of the partnership.
The balance sheet for CAB Partnership as of December 31, 2014, is as follows:
| Assets | |
| Cash $7,400 | $7,400 |
| Accounts Receivable | $30,800 |
| Inventory (at cost) | $32,500 |
| Land | $26,400 |
| Building (net of depreciation) | $39,100 |
| Equipment (net of depreciation) | $24,600 |
| Total | $160,800 |
| Liabilities and Capital | |
| Accounts Payable | $24,200 |
| Other Current Liabilities | $6,600 |
| Long-Term Note (8% due 2008) | $35,000 |
| Cox, Capital | $36,000 |
| Andrews, Capital | $24,000 |
| Bennet, Capital | $35,000 |
| Total | $160,800 |
The review of the accounts resulted in the accumulation of the following information:
- Approximately 5% of the accounts receivable are uncollectible. The old partnership had been using the direct write-off method of accounting for bad debts.
- Current replacement cost of the inventory is $41,700.
- The market value of the land based on a current appraisal is $59,400.
- The partners had been using an unreasonably long estimated life in establishing a depreciation policy for the building. On the basis of sound value (current replacement cost adjusted for use), the value of the building is $32,800.
- There are unrecorded accrued liabilities of $3,500.
The partners agree to recognize the foregoing adjustments to the accounts. Cox, Andrews, and Bennet share profits 40:30:30. After the admission of Meyers, the new profit agreement is to be 30:20:30:20. Meyers is to receive a 25% capital interest in the partnership after she invests sufficient cash to increase the total capital interest to $135,000. Because of the uncertainty of the business, no goodwill is to be recognized before or after Meyers is admitted.
- Prepare the necessary journal entries on the books of the old partnership to adjust the accounts.
- Record the admission of Meyers.
- Prepare a new balance sheet giving effect to the foregoing requirements.
Question-10
The December 31, 2014, balance sheet of the Datamation Partnership is shown below.
Dave, Allen, and Matt share profits and loses in the ratio of 50:30:20. The inventory on December 31 has a fair value of $63,000; accrued interest on the note payable to Dave is to be recognized as of December 31. The book values of all the other accounts are equal to their fair values. Allen withdrew from the partnership on December 31, 2014.
| Datamation Partnership | |
| Balance Sheet | |
| 31-Dec-14 | |
| Assets | |
| Cash | $84,000 |
| Accounts Receivable | $83,000 |
| Inventory | $59,000 |
| Equipment | $278,000 |
| Total Assets | $504,000 |
| Liabilities and Partners’ Equity | |
| Accounts Payable | $60,000 |
| Notes Payable to Dave, 8% dated September 1, 2014 | $23,000 |
| Dave, Capital | $230,000 |
| Allen, Capital | $109,000 |
| Matt, Capital | $96,000 |
| Total Liabilities and Partners’ Equity | $504,000 |
Prepare the journal entry or entries to record the withdrawal of Allen, given each of the following situations. Assume that the bonus method is used to account for the withdrawal.
- Allen receives $34,016 cash and a $76,000 note from the partnership for his interest.
- Matt purchases Allen’s interest for $109,000.
- The partnership gives Allen $36,000 cash and equipment with a book value and a fair value of $98,000 for his interest.
- The partnership gives Allen $96,000 cash for his interest.
- Allen sells one-fourth of his interest to Dave for $40,000 and three-fourths to Matt for $88,000.
Question-11
The partnerships of Up & Down and Back & Forth started in business on July 1, 2011; each partnership owns one retail appliance store. It was agreed as of June 30, 2014, to combine the partnerships to form a new partnership to be known as Discount Partnership. Trial balances of the two original partnerships as of June 30, 2014 follow.
| Up & Down Trial Balance | Back & Forth Trial Balance | ||
| Cash | $25,000 | $21,000 | |
| Accounts Receivable | $91,000 | $138,000 | |
| Allowance for Doubtful Accounts | $2,000 | ||
| Merchandise Inventory | $180,000 | $116,000 | |
| Land | $25,000 | $34,000 | |
| Buildings & Equipment | $85,000 | $124,000 | |
| Allowance For Depreciation | $24,000 | ||
| Prepaid Expenses | $7,000 | $8,000 | |
| Accounts Payable | $48,000 | ||
| Notes Payable | $64,000 | ||
| Accrued Expenses | $35,000 | ||
| Up, Capital | $95,000 | ||
| Down, Capital | $145,000 | ||
| Back, Capital | |||
| Forth, Capital | |||
| $413,000 | $413,000 | $441,000 | |
The following additional information is available.
- The profit- and loss-sharing ratios for the former partnerships were 40% to Up and 60% to Down; 30% to Back and 70% to Forth. The profit- and loss-sharing ratio for the new partnership will be Up, 20%; Down, 30%; Back, 15%; and Forth, 35%.
- The opening capital ratios for the new partnership are to be the same as the profit- and loss-sharing ratios for the new partnership. The capital assigned to Up & Down will total $224,000. Any cash settlements among the partners arising from capital account adjustments will be a private matter and will not be recorded on the partnership books.
- The partners agreed that the allowance for bad debts for the new partnership is to be 4% of the accounts receivable balances.
- The opening inventory of the new partnership is to be valued by the FIFO method. The inventory of Up & Down was valued by the FIFO method and the Back & Forth inventory was valued by the LIFO method. The LIFO inventory represents 80% of its FIFO value.
- Depreciation is to be computed by the double-declining balance method with a 10-year life for the depreciable assets. Depreciation for three years is to be accumulated in the opening balance of the Allowance for Depreciation account. Up & Down computed depreciation by the straight-line method, and Back & Forth used the double-declining balance method. All assets were obtained on July 1, 2011.
- After the books were closed, an unrecorded merchandise purchase of $4,000 by Back & Forth was discovered. The merchandise had been sold by June 30, 2014.
- The accounts of Up & Down include a vacation pay accrual. It was agreed that Back & Forth should make a similar accrual for their 10 employees, who will receive a two-week vacation of $130 per employee per week.
- Prepare a worksheet to determine the opening balances of a new partnership after giving effect to the information above. Formal journal entries are not require the computation of goodwill, should be in good form.
- Prepare a schedule computing the cash to be exchanged between Up & Down and between Back & Forth, in settlement of the affairs of each original partners