1. Assume that two individuals agree to form a partnership. Partner A is contrib
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Question
1. Assume that two individuals agree to form a partnership. Partner A is contributing an operating business that reports the following balance sheet:
.$ 60,000
Accounts payable.
$ 80,000
Accrued liabilities
Total liabilities
$140,000
Total assets
$240,000
Net assets
Partner B is contributing cash of $140,000. The partners agree that the initial capital of the partnership should be shared equally.
Required: Prepare the journal entry to record the capital contributions of the partners assuming that the partners wish to employ the Bonus Method.
2. Assume that Partners A and B each report a Capital Account of $450,000. Partner C wants to join the partnership as an equal one-third partner. Because the partnership has been very profitable, Partners A and B require Partner C to contribute $900,000 in cash to the partnership in return for a one-third interest. Assume that Partners A and B share profits 60% and 40%, respectively, prior to the admission of Partner C. After admission of Partner C, Partners A and B retain their relative proportion of profit allocation after granting Partner C a 30% profit-allocation interest.
Required: Use the Bonus Method to record the journal entry on the books of the partnership to reflect the admission of Partner C.
3. Assume that Partners A and B have Capital Accounts equal to $600,000 and $300,000, respectively. Partner C wants to join the partnership as one-third partner. Partner C contributes $1,275,000 in cash to the partnership in return for a one-third interest. Prior to the admission of Partner C, Partners A and B wish to revalue the long-term assets of the partnership. They obtain an appraisal of the land and building that indicated a current value of $1.5 million. The land and building are currently reported on the partnership balance sheet at $300,000.
Required: Record the journal entry on the books of the partnership to reflect the revaluation of the land and building and the admission of Partner C with a capital contribution of $1,275,000. Assume that despite the evidence of a previously unrecognized intangible asset, the partners do not wish to record the intangible asset. Assume that the partners allocate profits equally.
4. The ABC partnership reports the following condensed balance sheet:
Cash
$1,010,000
Liabilities
$1,600,000
Noncash assets
2,550,000
Partner A, capital
900,000
Partner B, capital
900,000
Partner C, capital
160,000
Total assets
$3,560,000
Total liabilities and partner capital
$3,560,000
The partners wish to liquidate the partnership. The noncash assets are sold for $2,000,000 with the loss distributed to the partners in the ratio of 30%/30%/40% to partner A, B, and C, respectively. The liabilities are paid in full. Partners make any capital contribution that is necessary to offset a negative balance in their respective Capital Accounts.
Required: Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners.
5. Following is financial data for the Center for New Horizons, a not-for-profit organization promoting sustainable business operations:
Unrestricted
Temporarily
Restricted
Permanently
Restricted
Revenues - Contributions
$1,288,000
$ 128,800
$20,700
Revenues - Investment
8,832
13,248
22,080
Net Assets, beginning of year
736000
506,000
184,000
Contributions Receivable
296,700
Expenses - Program
1,196,000
PPE, net
570,400
Depreciation expense
41,400
Long-term Liabilities
315,100
Cash
5,060
Payables
216,200
Investments
1,159,200
Net Assets Released from Restriction
92000
Expenses - Support
170,200
Required: Prepare the Statement of Activities and the Statement of Financial Position.
.$ 60,000
Accounts payable.
$ 80,000
Accrued liabilities
Total liabilities
$140,000
Total assets
$240,000
Net assets
Explanation / Answer
Calculation of Contribution made by partner A:
Total Assets
$ 240,000
Less: Total Liabilities
$ (140,000)
Net Assets contributed by A
$ 100,000
Cash Contributed by B
$ 140,000
Total Capital of the business = 100000+140000
$ 240,000
Capital of Partner A (240000*50%)
$ 120,000
Capital of Partner B (240000*50%)
$ 120,000
Journal Entry
Accounts / Explanations
Debit
Credit
Net Assets
$ 100,000
Cash
$ 140,000
Partner A's Capital Account
120000
Partner B's Capital Account
120000
Calculation of Contribution made by partner A:
Total Assets
$ 240,000
Less: Total Liabilities
$ (140,000)
Net Assets contributed by A
$ 100,000
Cash Contributed by B
$ 140,000
Total Capital of the business = 100000+140000
$ 240,000
Capital of Partner A (240000*50%)
$ 120,000
Capital of Partner B (240000*50%)
$ 120,000
Journal Entry
Accounts / Explanations
Debit
Credit
Net Assets
$ 100,000
Cash
$ 140,000
Partner A's Capital Account
120000
Partner B's Capital Account
120000
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