accounting for partnerships-4

8/10/2019 Accounting for Partnerships-4

1/21

Chapter12-1

ACCOUNTING FORACCOUNTING FOR

PARTNERSHIPSPARTNERSHIPS


2/21

Chapter12-2

E12-8E12-8variationvariation The ARES partnership at December31 has cash $20,000, noncash assets $100,000,

liabilities $55,000, and the followin capital balances!"assandra $#5,000 and enelope $20,000% The firm isli&'idated, and $120,000 in cash is recei(ed for thenoncash assets% "assandra and enelope income ratios

are )0* and #0*, respecti(el+%Instructions:

repare a cash distrib'tion sched'le%

Liquidation of a PartnershipLiquidation of a Partnership


LO 5 Explain the effects of the entries to recordLO 5 Explain the effects of the entries to recordthe liquidation of a partnership.the liquidation of a partnership.

o "apitalDeficienc+


3/21

Chapter12-3

E12-8E12-8variation repare a cash distrib'tion sched'le%




o "apitalDeficienc+

1 21 2

!!

""


4/21

Chapter12-4

E12-#E12-# Data for The ARES partnership are presentedin E12-.%

repare the entries to record!

a/ The sale of noncash assets%b/ The allocation of the ain or loss on li&'idation to

the partners%

c/ a+ment of creditors%d/ Distrib'tion of cash to the partners%




o "apitalDeficienc+


5/21

Chapter12-5

E12-#E12-# repare the entries to record! a/ The sale ofnoncash assets% b/ The allocation of the ain or loss onli&'idation to the partners% c/ a+ment of creditors% d/Distrib'tion of cash to the partners%




oncash assets 100,000"ash 120,000$a%

ain on realiation 20,000

"assandra, "apital $20,000 )0*/ 12,000ain on realiation 20,000$&%

enelope, "apital $20,000 #0*/ .,000

o "apitalDeficienc+


6/21

Chapter12-6

E12-#E12-# repare the entries to record! a/ The sale ofnoncash assets% b/ The allocation of the ain or loss onli&'idation to the partners% c/ a+ment of creditors% d/Distrib'tion of cash to the partners%




"ash 55,0004iabilities 55,000$c%

enelope, "apital 2.,000"assandra, "apital 5,000$d%

"ash .5,000

o "apitalDeficienc+


7/21

Chapter12-7

The first step in the li&'idation of a partnership isto!

a% allocate ain6loss on realiation to the partners%

b% distrib'te remainin cash to partners%

c% pa+ partnership liabilities%

d% sell noncash assets and reconie a ain or losson realiation%

'uestion'uestion

Liquidation of a PartnershipLiquidation of a PartnershipLiquidation of a PartnershipLiquidation of a Partnership



8/21

Chapter12-8



Loo( pa)e 528

"apitalDeficienc+


9/21

Chapter12-9

E12-1*E12-1* rior to the distrib'tion of cash to the partners,the acco'nts in the 78 "ompan+ are! "ash $2.,000, ewell"apital "r%/ $1,000, 7ennins "apital "r%/ $15,000, and8arle+ "apital Dr%/ $#,000% The income ratios are 5!3!2,respecti(el+%

9nstr'ctions

$a% repare the entr+ to record 1/ 8arle+:s pa+ment of$#,000 in cash to the partnership and 2/ the distrib'tion

of cash to the partners with credit balances%$&% repare the entr+ to record 1/ the absorption of8arle+:s capital deficienc+ b+ the other partners and 2/ thedistrib'tion of cash to the partners with credit balances%



"apitalDeficienc+


10/21

Chapter12-1



+e,ell .ennin)s /arle0ash apital apital apital

alances &efore liquidation 28***3 $14***%3 $15***%3 "***3

/arle0 pa0ent "*** $"***%

alance !2***3 $14***%3 $15***%3 -3

E12-1*E12-1* $a%

8arle+, "apital

#,000

"ash #,000$a%

7ennins, "apital 15,000ewell, "apital 1,000

"ash

32,000

"apitalDeficienc+


11/21

Chapter12-11



+e,ell .ennin)s /arle0ash apital apital apital

alances &efore liquidation 28***3 $14***%3 $15***%3 "***3

6&sor& /arle0 deficienc0 25** 15** $"***%

alance 28***3 $1"5**%3 $1!5**%3 -3

E12-1*E12-1* $&%

7ennins, "apital 1,500ewell, "apital 2,500$&%

7ennins, "apital 13,500ewell, "apital 1#,500

"ash

2. 000

8arle+, "apital

#,000

"apitalDeficienc+


12/21

Chapter12-12

9f a partner with a capital deficienc+ is 'nable topa+ the amo'nt owed to the partnership, thedeficienc+ is allocated to the partners with creditbalances!

a% e&'all+%

b% on the basis of their income ratios%

c% on the basis of their capital balances%d% on the basis of their oriinal in(estments%

'uestion'uestion




13/21

Chapter12-13

6dission of a Partner6dission of a Partner6dission of a Partner6dission of a Partner

LO 7 Explain the effects of the entries ,hen a ne,LO 7 Explain the effects of the entries ,hen a ne,partner is aditted.partner is aditted.

9ll'stration 12A-1


14/21

Chapter12-14

Purchase of a Partner8s InterestPurchase of a Partner8s InterestPurchase of a Partner8s InterestPurchase of a Partner8s Interest

Loo( pa)e 5!!-5!"Loo( pa)e 5!!-5!"

Ass'me that 4% "arson arees to pa+ $10,000 each to "%Ames and D% ;ar


15/21

Chapter12-15

Investent of 6ssets in a PartnershipInvestent of 6ssets in a PartnershipInvestent of 6ssets in a PartnershipInvestent of 6ssets in a Partnership

Ass'me that 4% "arson arees to in(est $30,000 incash in the Ames-bar


16/21

Chapter12-16

ithdra,al of a Partnerithdra,al of a Partnerithdra,al of a Partnerithdra,al of a Partner

LO 4 ;escri&e the effects of the entries ,hen aLO 4 ;escri&e the effects of the entries ,hen a

partner ,ithdra,s fro the fir.partner ,ithdra,s fro the fir.

A partner ma+ withdraw from a partnershipvoluntaril0, b+ sellin his or her e&'it+ in the firm%

=r, he or she ma+ withdraw involuntaril0, b+reachin mandator+ retirement ae or b+ d+in%

The withdrawal of a partner, li


17/21

Chapter12-17

ithdra,al of a Partnerithdra,al of a Partnerithdra,al of a Partnerithdra,al of a Partner

9ll'stration 12A-)

LO 4 ;escri&e the effects of the entries ,hen aLO 4 ;escri&e the effects of the entries ,hen a

partner ,ithdra,s fro the fir.partner ,ithdra,s fro the fir.


18/21

Chapter12-18

Pa0ent /ro Partners8 Personal 6ssetsPa0ent /ro Partners8 Personal 6ssetsPa0ent /ro Partners8 Personal 6ssetsPa0ent /ro Partners8 Personal 6ssets

Ass'me that partners >or, ead, and =dom ha(ecapital balances of $25,000, $15,000, and $10,000,respecti(el+% >or and ead aree to b'+ o't =dom:sinterest% Each of them arees to pa+ =dom $.,000 inechane for one-half of =dom:s total interest of

$10,000% The entr+ to record the withdrawal is!

ead, "apital 5,000 >or, "apital 5,000=dom, "apital 10,000

+ote that net assets and total capital reain the saeat 35****. 9he 317*** paid to Odo &0 thereainin) partners isnt recorded &0 the partnership.

Look page:537Look page:537


19/21

Chapter12-19

Pa0ent /ro Partnership 6ssetsPa0ent /ro Partnership 6ssetsPa0ent /ro Partnership 6ssetsPa0ent /ro Partnership 6ssets

Ass'me that the followin capital balances eist in theRST partnership! Roman $50,000, Sand $30,000, andTer< $20,000% The partners share income in the ratioof 3!2!1, respecti(el+% Ter< retires from thepartnership and recei(es a cash pa+ment of $25,000

from the firm%9n this eample, a bon's is paid to the retirinpartner since the cash paid to the retirinpartner is more than his6her capital balance%

Allocate the bon's to the remainin partners on the basisof their income ratios%

LO 4 ;escri&e the effects of the entries ,hen aLO 4 ;escri&e the effects of the entries ,hen apartner ,ithdra,s fro the fir.partner ,ithdra,s fro the fir.


20/21

Chapter12-2



from the firm%The bon's paid to the retirin partner is$5,000, the difference between the $25,000paid to the retirin partner and his6her capital

balance%

The allocation of the $5,000 bon's is! Roman $3,000$5,000 ? 365/ and Sand $2,000 $5,000 ? 265/%

LO 4 ;escri&e the effects of the entries ,hen aLO 4 ;escri&e the effects of the entries ,hen apartner ,ithdra,s fro the fir.partner ,ithdra,s fro the fir.


21/21

Chapter12-21



from the firm%The @o'rnal entr+ to record the withdrawal ofTer< is as follows!

LO 4 ;escri&e the effects of the entries ,hen aLO 4 ;escri&e the effects of the entries ,hen apartner ,ithdra,s fro the firpartner ,ithdra,s fro the fir

Ter

accounting for partnerships-4

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