PROBLEMS

Prob. 121A
1.
June 1 Cash ......................................................................
Merchandise Inventory ........................................
Kevin Schmidt, Capital ...................................

12,000
32,000

1 Cash ......................................................................
Accounts Receivable ...........................................
Merchandise Inventory ........................................
Equipment.............................................................
Allowance for Doubtful Accounts .................
Accounts Payable ...........................................
Notes Payable .................................................
David Cohen, Capital ......................................

13,000
14,900
28,600
35,000

44,000

1,000
6,500
4,000
80,000

2.
SCHMIDT AND COHEN
Balance Sheet
June 1, 2009
Assets
Current assets:
Cash ...........................................................
Accounts receivable .................................
Less allowance for doubtful accounts ....
Merchandise inventory .............................
Total current assets ............................
Plant assets:
Equipment .................................................
Total assets ....................................................

$ 25,000
$ 14,900
1,000

Liabilities
Current liabilities:
Accounts payable .....................................
Notes payable............................................
Total liabilities ................................................
Partners Equity
Kevin Schmidt, capital ...................................
David Cohen, capital ......................................
Total partners equity .....................................
Total liabilities and partners equity .............

680

13,900
60,600
$ 99,500
35,000
$134,500

$ 6,500
4,000
$ 10,500
$ 44,000
80,000
124,000
$134,500

Prob. 121A

Concluded

3.
May 31 Income Summary .................................................
Kevin Schmidt, Capital ...................................
David Cohen, Capital ......................................

84,000

31 Kevin Schmidt, Capital ........................................

David Cohen, Capital ...........................................
Kevin Schmidt, Drawing .................................
David Cohen, Drawing ....................................

30,000
25,000

47,200*
36,800*

30,000
25,000

*Computations:
Interest allowance ..........................................
Salary allowance ............................................
Remaining income (1:1) .................................
Net income ......................................................
1
2

10% $44,000
10% $80,000

681

Schmidt

Cohen

Total

$ 4,4001
36,000
6,800
$ 47,200

$ 8,0002
22,000
6,800
$ 36,800

$ 12,400
58,000
13,600
$ 84,000

Prob. 122A
(1)
$150,000
Drury
Wilkins

Plan
a.
b.
c.
d.
e.
f.

...................................................
...................................................
...................................................
...................................................
...................................................
...................................................

$ 75,000
60,000
100,000
89,000
83,000
92,900

$ 75,000
90,000
50,000
61,000
67,000
57,100

(2)
$66,000
Drury
Wilkins
$ 33,000
26,400
44,000
38,600
41,000
42,500

$ 33,000
39,600
22,000
27,400
25,000
23,500

Details
$150,000

$66,000

Drury

Wilkins

Drury

Wilkins

a.

Net income (1:1) ........................

$ 75,000

$ 75,000

$ 33,000

$ 33,000

b.

Net income (2:3) ........................

$ 60,000

$ 90,000

$ 26,400

$ 39,600

c.

Net income (2:1) ........................

$100,000

$ 50,000

$ 44,000

$ 22,000

d.

Interest allowance .....................

Remaining income (3:2) ............
Net income .................................

2,000
87,000
$ 89,000

3,000
58,000
$ 61,000

2,000
36,600
$ 38,600

e.

Interest allowance .....................

Salary allowance .......................
Remaining income (1:1) ............
Net income .................................

2,000
34,000
47,000
$ 83,000

3,000
17,000
47,000
$ 67,000

2,000
34,000
5,000
$ 41,000

f.

Interest allowance .....................

Salary allowance .......................
Bonus allowance .......................
Remaining income (1:1) ............
Net income .................................

1
2

2,000
34,000
19,8001
37,100
$ 92,900

20% ($150,000 $51,000)

20% ($66,000 $51,000)

682

3,000
17,000

37,100
$ 57,100

2,000
34,000
3,0002
3,500
$ 42,500

3,000
24,400
$ 27,400
3,000
17,000
5,000
$ 25,000
3,000
17,000

3,500
$ 23,500

Prob. 123A
1.
MOSHREF AND WEEKLEY
Income Statement
For the Year Ended December 31, 2010
Professional fees.................................................................
Operating expenses:
Salary expense ...............................................................
Depreciation expensebuilding ..................................
Property tax expense.....................................................
Heating and lighting expense .......................................
Supplies expense...........................................................
Depreciation expenseoffice equipment ....................
Miscellaneous expense .................................................
Total operating expenses ........................................
Net income ...........................................................................

$312,300
75,000
3,500
11,200
3,400
6,700
2,100

Amid
Moshref

Alex
Weekley

Division of net income:

Salary allowance ........................................
Interest allowance ......................................
Remaining income .....................................
Net income .......................................................

$ 60,000
15,000*
(9,400)
$ 65,600

$562,200

414,200
$148,000

Total

$ 75,000
$ 135,000
16,800**
31,800
(9,400)
(18,800)
$ 82,400
$ 148,000

*$125,000 12%
**($160,000 $20,000) 12%

2.
MOSHREF AND WEEKLEY
Statement of Partners Equity
For the Year Ended December 31, 2010

Capital, January 1, 2010..................................

Additional investment during the year ..........
Net income for the year ..................................
Withdrawals during the year ..........................
Capital, December 31, 2010 ............................

683

Amid
Moshref

Alex
Weekley

$ 125,000

$ 125,000
65,600
$ 190,600
50,000
$ 140,600

$ 140,000
20,000
$ 160,000
82,400
$ 242,400
60,000
$ 182,400

Total
$ 265,000
20,000
$ 285,000
148,000
$ 433,000
110,000
$ 323,000

Prob. 123A

Concluded

3.
MOSHREF AND WEEKLEY
Balance Sheet
December 31, 2010
Assets
Current assets:
Cash ............................................................
Accounts receivable ..................................
Supplies ......................................................
Total current assets .............................
Plant assets:
Land ............................................................
Building ......................................................
Less accumulated depreciation ..........
Office equipment........................................
Less accumulated depreciation ..........
Total plant assets ............................
Total assets .....................................................

$ 24,200
41,300
6,700
$ 72,200
$120,000
$160,000
52,300
$ 53,000
21,300

Liabilities
Current liabilities:
Accounts payable ......................................
Salaries payable .........................................
Total liabilities .................................................

107,700
31,700
259,400
$331,600

3,400
5,200
$

8,600

Partners Equity
Amid Moshref, capital .....................................
Alex Weekley, capital ......................................
Total partners equity ......................................
Total liabilities and partners equity ..............

684

$140,600
182,400
323,000
$331,600

Prob. 124A
1.

May 31

Asset Revaluations ......................................

Accounts Receivable ..............................
Allowance for Doubtful Accounts..........

2,470
2,000
470*

*[($21,400 $2,000) 5%] $500

31
31

31

2.

June 1
1

Merchandise Inventory ................................

Asset Revaluations .................................

5,270

Accumulated DepreciationEquipment ....

Equipment ...............................................
Asset Revaluations .................................

25,700

Asset Revaluations ......................................

Jordan Cates, Capital .............................
LaToya Orr, Capital .................................

23,500

LaToya Orr, Capital ......................................

Caleb Webster, Capital ...........................

30,000

Cash...............................................................
Caleb Webster, Capital ...........................

35,000

685

5,270
5,000
20,700
11,750
11,750

30,000
35,000

Prob. 124A

Concluded

3.
CATES, ORR, AND WEBSTER
Balance Sheet
June 1, 2010
Assets
Current assets:
Cash ............................................................
Accounts receivable ..................................
Less allowance for doubtful accounts .....
Merchandise inventory ..............................
Prepaid insurance ......................................
Total current assets .............................
Plant assets:
Equipment ..................................................
Total assets .....................................................

$44,4001
$19,400
970

18,430
63,870
3,500
$130,200
90,000
$220,200

Liabilities
Current liabilities:
Accounts payable ......................................
Notes payable.............................................
Total liabilities .................................................

$14,700
12,000
$ 26,700

Partners Equity
Jordan Cates, capital ......................................
LaToya Orr, capital ..........................................
Caleb Webster, capital ....................................
Total partners capital .....................................
Total liabilities and partners capital .............
1

$9,400 + $35,000
$75,000 + $11,750
3
$60,000 + $11,750 $30,000
2

686

$86,7502
41,7503
65,000
193,500
$220,200

Prob. 125A
1.

HARKEN, SEDLACEK, AND ELDRIDGE

Statement of Partnership Liquidation
For the Period September 1030, 2010
Capital
Cash

Balances before realization ...............

Sale of assets and division of loss ...
Balances after realization ..................
Payment of liabilities..........................
Balances after payment of liabilities
Receipt of deficiency .........................
Balances .............................................
Cash distributed to partners .............
Final balances ....................................
2. a.

$
+
$

$
+
$

7,800
32,600
40,400
8,000
32,400
1,500
33,900
33,900
0

Noncash
+ Assets = Liabilities +
$ 61,400
61,400
$
0

$
0

$
0

$
0

Kris Harken, Capital .................................................

Amy Eldridge, Capital ..............................................
Brett Sedlacek, Capital .......................................

$
$

$
$
$

8,000

8,000
8,000
0

Harken
(25%)
$ 31,000
7,200
$ 23,800

$ 23,800

$ 23,800
23,800
$
0

Sedlacek
Eldridge
+ (25%)
+
(50%)
$ 5,700
7,200
$ (1,500)

$ (1,500)
+ 1,500
$
0

$
0

$ 24,500
14,400
$ 10,100

$ 10,100

$ 10,100
10,100
$
0

500
1,000
1,500

The $1,500 deficiency of Sedlacek would be divided between the other partners, Harken and Eldridge, in their
income-sharing ratio (1:2 respectively). Therefore, Harken would absorb 1/3 of the $1,500 deficiency, or $500,
and Eldridge would absorb 2/3 of the $1,500 deficiency, or $1,000.
b. Kris Harken, Capital .................................................
Amy Eldridge, Capital ..............................................
Cash .....................................................................
*$23,800 $500
**$10,100 $1,000

687

23,300*
9,100**
32,400

Prob. 126A
1. a.
MCADAMS, COOPER, AND ZHANG
Statement of Partnership Liquidation
For Period June 329, 2010
Capital
Cash
Balances before realization .............
Sale of assets and division
of gain ...........................................
Balances after realization ................
Payment of liabilities........................
Balances after payment
of liabilities ...................................
Cash distributed to partners ...........
Final balances ..................................

Noncash
McAdams
Cooper
Assets = Liabilities +
(1/5)
+
(2/5)

Zhang
(2/5)

$ 29,000

$ 242,000

$ 55,000

$ 14,000

$ 84,000

$ 118,000

+ 290,000
$ 319,000
55,000

242,000
$
0

$ 55,000
55,000

+ 9,600
$ 23,600

+ 19,200
$ 103,200

+ 19,200
$ 137,200

$ 264,000
264,000
$
0

$ 23,600
23,600
$
0

$ 103,200
103,200
$
0

$ 137,200
137,200
$
0

688

Prob. 126A

Concluded

1. b.

MCADAMS, COOPER, AND ZHANG

Statement of Partnership Liquidation
For Period June 329, 2010
Capital
Cash

Balances before realization ...............

Sale of assets and division of loss ...
Balances after realization ..................
Payment of liabilities..........................
Balances after payment of liabilities
Receipt of deficiency .........................
Balances .............................................
Cash distributed to partners .............
Final balances ....................................
2. a.

$
+
$

$
+
$

29,000
132,000
161,000
55,000
106,000
8,000
114,000
114,000
0

Noncash
McAdams
Cooper
+ Assets = Liabilities +
(1/5)
+
(2/5)
$ 242,000
242,000
$
0

$
0

$
0

$
0

Cooper, Capital .........................................................

Zhang, Capital ..........................................................
McAdams, Capital ...............................................

$ 55,000

$ 55,000
55,000
$
0

$
0

$
0

$ 14,000
22,000
$ (8,000)

$ (8,000)
+ 8,000
$
0

$
0

$ 84,000
44,000
$ 40,000

$ 40,000

$ 40,000
40,000
$
0

Zhang
(2/5)
$ 118,000
44,000
$ 74,000

$ 74,000

$ 74,000
74,000
$
0

4,000
4,000
8,000

The $8,000 deficiency of McAdams would be divided between the other partners, Cooper and Zhang, in their
income-sharing ratio (1:1 respectively). Therefore, Cooper would absorb 1/2 of the $8,000 deficiency, or
$4,000, and Zhang would absorb 1/2 of the $8,000 deficiency, or $4,000.
b. Cooper, Capital .........................................................
Zhang, Capital ..........................................................
Cash .....................................................................
*$40,000 $4,000
**$74,000 $4,000

689

36,000*
70,000**
106,000