1. Chesterfield Company holds cash of $72,000, inventory worth $134,000, and a b
ID: 2561881 • Letter: 1
Question
1. Chesterfield Company holds cash of $72,000, inventory worth $134,000, and a building worth $152,000. Unfortunately, the company also has accounts payable of $202,000, a note payable of $102,000 (secured by the inventory), liabilities with priority of $43,600, and a bond payable of $194,000 (secured by the building).
In a Chapter 7 bankruptcy, how much money will the holder of the bond expect to receive?
Need Help to solve solution:
Total amount received by bond holders:
Total amount received by bond holders
week 7
7. The Prince-Robbins partnership has the following capital account balances on January 1, 2015:
Prince is allocated 80 percent of all profits and losses with the remaining 20 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances.
Prince, Capital..... $145,000
Robbins, Capital.. 135,000
On January 2, 2018, Jeffrey invests $82,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $35,000.
a. Prepare the journal entry to record Jeffrey's entrance into the partnership on January 2, 2018.
b. Determine the allocation of income at the end of 2018
Need Help complete this question by entering your answers in the tabs below:
A. Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No
Transaction
General Journal
Debit
Credit
1
1
No Transaction Recorded
B. Determine the allocation of income at the end of 2018.
Income Allocation
Prince
Robbins
Jeffrey
4.
The E.N.D. partnership has the following capital balances as of the end of the current year:
Pineda $ 140,000
Adams120,000
Fergie 110,000
Gomez 100,000
a. assume the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $140,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners?
b. Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $340,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners? (Do not round your intermediate calculations. Round your final answers to the nearest dollar amounts.)
Capital Balance.
a. Pineda
Adams
Gomez
b. Adams
Fergie
Gomez
5.
ray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson con-tribute cash and other properties valued at $210,000, $180,000, and $90,000, respectively.
An articles of partnership agreement is drawn up. It has the following stipulations: • Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year. • Profits and losses are allocated according to the following plan:
(1) A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
(2) Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that the bonus cannot be a negative amount.
(4) Any remaining partnership profit or loss is to be divided evenly among all partners.
Because of monetary problems encountered in getting the business started, Gray invests an additional $9,100 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 25 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable.
The billable hours for the partners during the first three years of operation follow:
2016 2017 2018
Gray . . . . . . . . . . . . . 1, 710 1,800 1,880
Stone . . . . . . . . . . . . . 1,440 1,500 1,620
Lawson . . . . . . . . . . . 1,300 1,380 1,310
Monet . . . . . . . . . . . . –0– 1,190 1,580
The partnership reports net income for 2013 through 2015 as follows: 2013 . . . . . 2016. . . . . . . . . . . . . . . . . . $ 65,000
2017 . . . . . . . . . . . . . . . . . . . (20,400)
2018 . . . . . . . . . . . . . . . . . . . 152,800
Each partner withdraws the maximum allowable amount each year.
a. Determine the allocation of income for each of these three years (to the nearest dollar).
b. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.
Need Help to Solve solutions as follow:
Req A 2016
Determine the allocation of income for 2016. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
Income Allocation—2016
Gray
Stone
Lawson
Totals
Salary allowance
$0
Interest
0
Bonus
0
Remainder to allocate
0
Income allocation
$0
$0
$0
$0
Req A 2017
Determine the allocation of income for 2017. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
Income Allocation—2017
Gray
Stone
Lawson
Monet
Totals
Salary allowance
$0
Interest
0
Bonus
0
Remainder to allocate
0
Income allocation
$0
$0
$0
$0
$0
Req A 2018
Determine the allocation of income for 2018. (Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
Income Allocation—2018
Gray
Stone
Lawson
Monet
Totals
Salary allowance
$0
Interest
0
Bonus
0
Remaining net income
0
Income allocation
$0
$0
$0
$0
$0
Req B
Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018. (Amounts to be deducted should be indicated with minus sign. Do not round intermediate calculations. Round your answers to nearest dollar amounts.)
GRAY, STONE, LAWSON, and MONET
Statement of Partners' Capital
For the Year Ending December 31, 2018
Gray
Stone
Lawson
Monet
Totals
Beginning balances
$0
Profit allocation
0
Drawings
0
Ending Balances
$0
$0
$0
$0
$
Total amount received by bond holders
Explanation / Answer
PART 1. BANKRUPTCY UNDER CHAPTER 7 :
From the given information, we can pay the outstanding liabilities in the following manner :
First of all, priority liability will be discharged from the cash availabe on hand.
Thereafter the Note Payable against the inventory will be paid.
Bonds are secured against building ,, but the value of the building is $ 152,000.
So the bond holders will be paid $152,000 immediately and the rest $42,000 will be classified as unsecured loans and will receive only that much part from the freely available funds as is propotional.
let us calculate the charge free assets available to discharge unsecured creditors :
Hence the total amount received by bond holders is $162,350 (152,000+10350)
PART 2 : JOURNAL ENTRY ON JEFFERY'S ENTRY INTO THE PARTNERSHIP
Calculation of goodwill :
Opening balance total of the two parters' capital accounts is $280,000. Jeffery's capital of 82,000 gives total Capital account balance to be $362,000.
now, it is mentioned that Jeffery brings $82000 for his 20 % interest in partnership. So, the total value of the partnership firm should be $410,000. (82000/20%)
But the total of capital accounts is $362000. So the balance $48,000 is the good will of the firm.
ALLOCATION OF PROFITS FOR 2018:
The new profit sharing ratio is 50:30:20 and the profits for the year is $35000.
So the profit will be allocated between the partners in following manner :
PART 4 : E.N.D. PARTNERSHIP :
A. WHEN FERGIE RETIRES, profit ratio is 3:3:2:2.
Closing balance of Fergie's capital account is $110,000, but is paid $140000. So we can conclude that $30000 is paid towards goodwill for his 2/10th share in partnership.
Hence total goodwill is 150000 (30000*10/2), which can be divided between the 4 partners in their profit sharing ratio as 45000 :45000:30000:30000.
Hence, the balance of capital accounts for the remaining partners is :
PINEDA : 140000+45000 = $185,000
ADAMS : 120000+45000 = $ 165,000
GOMES : 100000+30000 = $130,000.
B. WHEN PINEDA RETIRES and is paid $340000.
Here, the profit sharing ratio is 4:3:2:1.
Against Pineda's 4/10th share, he is paid $340,000
Total capital account balances before his retirement were $470000. After payment to Pineda, the total capital balance is $130000. This balance will be diveded among the remaining partners in the original ratio of 3:2:1
Hence the capital account balances of the remaining partners should be :
ADAMS $65,000
FERGIE $43,333
GOMES $21,667
PARTICULARS CALCULATIONS AMOUNTS IN $ Cash on hand after discharge of Priority liability (72,000-43,600) 28,400 Invenory after honoring notes payable (134,000-102,000) 32,000 Building after payment against bonds (152,000-152,000) 0 Total charge free assets(i) 60,400 Unsecured Loans: Balance payable to bond holders not secured by building (194,000-152,000) 42,000 Accounts payable 202,000 Total (ii) 244,000 Amount payable to bond holders from Free assets (60400*42000)/244000 10350Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.