Mark Malone, Pete Patton, and Sally Spencer formed a partnership on January 1, 2

Question

Mark Malone, Pete Patton, and Sally Spencer formed a partnership on January 1, 2008. Their original capital investments (all cash) were $140,000, $160,000, and $100,000, respectively. During the first year of operation, Mark withdrew $30,000 and the partnership reported a net income of $60,000. The partnership agreement stipulates that all income and losses are to be divided in the ratio of the original capital investment. At the beginning of the second year, the partners decided to liquidate the business because of a disagreement. The assets and liabilities on January 2, 2009, were as follows: Cash, $37,000; Accounts Receivable, $129,000; Inventory, $188,000; Land, $85,000; Building (net), $180,000; furniture and Fixtures (net), $30,000; Accounts Payable, $74,000; and Mortgage Payable, $145,000. The inventory was sold for three-quarters of its book value, the furniture and fixtures brought in $10,000, and $92,000 of the accounts receivable were collected. The remaining receivables were uncollectible. After the losses were allocated according to the partnership agreement and the accounts payable were paid in full, Pete accepted the land and building at book value and assumed the mortgage payable at book value as partial settlement of his capital interest. The cash balance was then distributed to the partners. Required: A. Prepare a statement of changes in partners

Explanation / Answer

journal entry for receiving monthly dues from homeowners association Dr Cash xxx Cr Dues (or some appropriate title for revenue) xxx for those who haven't paid their monthly dues on time Dr Accounts receivable xxx Cr Dues (or some appropriate title for revenue) xxx ---------------------------------- Operating activities Net income $25,630 Adjustments: Depreciation $5,000 loss from sale of land 2,100 decrease in AR 5,200 decrease in AP (18,730) Net cash from operating activities $19,200 Investing activities Proceeds from sale of land $5,900 Net cash from investing activities 5,900 Financing activities Proceeds from issue of stock 6,000 Dividend paid ($22,500) Net cash used in financing activities (16,500) Net increase in cash and cash equivalents 8,600 CCE at beg. of year $10,700 CCE at end of year $19,300

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