Exercise 12.
2
A.
Journal Entry for Formation of a partnership
Account Titles Dr Cr
Cash 50000
K. Yi, S. Lun's Capital 50000
Land 15000
Building 80000
E. Gao's Capital 95000
Cash 9000
Account Receivable 32000
Equipment 39000
Allowance for Doubtful Account 29000
Hughes's Capital 51000
B. What amount would be reported as total owners’ equity immediately after the investments?
50000 + 95000 +51000 196000
Exercise 12.5
A. Assume the partnership income-sharing agreement calls for income to be
divided 45% to Tsang and 55% to Woo. Prepare the journal entry to record the
allocation of net income.
Date Account Titles Ref Dr Cr
Income Summary 80000
Tsang, Capital 36000
(80000 * 45%)
Woo, Capital 44000
(80000 * 55%)
B. Assume the partnership income-sharing agreement calls for income to be divide
HK$30,000 to Tsang and HK$25,000 to Woo, with the remainder divided 45% to Tsa
Prepare the journal entry to record the allocation of net income
Date Account Titles Ref
Income Summary
Tsang, Capital
[30000 + (80000 - 30000 - 25000) * 45%]
Woo, Capital
[25000 + (80000 - 30000 - 25000) * 55%]
or income to be divided with a salary of C. Assume the partnership income-sharing agreem
er divided 45% to Tsang and 55% to Woo. HK$40,000 to Coburn and HK$35,000 to Woo, inte
ocation of net income. divided 50%–50%. Prepare the journal en
Dr Cr
80000
41250
38750 Date
Assume the partnership income-sharing agreement calls for income to be divided with a salary of
40,000 to Coburn and HK$35,000 to Woo, interest of 10% on beginning capital, and the remainder
divided 50%–50%. Prepare the journal entry to record the allocation of net income.
Total Salaries = 40,000 + 35,000 = 75,000
Total Interest on beginning capital = 60,000 * 10% + 90,000 * 10% = 15,000
So the negative amount 10,000 (80,000 - 75,000 - 15,000) to be devided to their
income sharing agreement 50% - 50%.
Account Titles & Explanations Ref Dr Cr
Income Summary 80000
Tsang, Capital 41000
(40000 + 60000 * 10% - 10000 * 50%)
Woo, Capital 39000
(35000 + 90000 * 10% - 10000 * 50%)
D. Compute the partners’ ending capital balances under the assumption in
part (c)
Ending Balance for Tsang = 60,000 + 41,000 - 18,000 = 83,000
Ending Balance for Woo = 90,000 + 39,000 - 24,000 = 105,000
nder the assumption in
18,000 = 83,000
24,000 = 105,000
Exercise 12.15
A. Assume Garrett joins the partnership by investing €88,000 for a 25% interest with
bonuses to the existing partners. Prepare the journal entry to record his investment.
Date Account Titles & Explanations Ref Dr
Cash 88000
Foss, Capital
Albertson, Capital
Espinosa, Capital
Garret, Capital
or a 25% interest with
B. Assume instead that Foss leaves the partnership. Foss is paid €110,
record his investment. bonus to the retiring partner. Prepare the journal entry to record Foss’s
Cr Date Account Titles & Explanations Ref
Foss, Capital
8000
Albertson, Capital
4800
Espinosa, Capital
3200 Cash
72000
rship. Foss is paid €110,000 with a
al entry to record Foss’s withdrawal.
Dr Cr
Problem 12.2
a.
1) Income Summary 30000
A. Lingyu, Capital 18000
(30,000 * 60%)
J. Woo, Capital 9000
(30,000 * 30%)
K. Cheng, Capital 3000
(30,000 * 10%)
2) Income Summary 40000
A. Lingyu, Capital 20000
J. Woo 15000
K. Cheng 5000
3) Income Summary 18100
A. Lingyu 17400
J. Woo 600
K. Cheng 100
DIVISION OF NET INCOME
b. A. Lingyu
Salary Allowance 15000
Interest Allowance
A. Lingyu 4800
J. Woo
K. Cheng
Total Interest
Total salaries and Int 19800
Net Income 40000 Remainder deficiency
Salary Allowance A. Lingyu -2400
A. Lingyu -15000 J. Woo
J. Woo -10000 K. Cheng
Remainder 15000 Total Reminder
Total Divison 17400
To each partner 5000
Net Income 19000
A. Lingyu 4800
J. Woo 3000
K. Cheng 2500
Balance 7800
Salary Allowance
A. Lingyu -15000
Reminder -7200
To each partner -2400
LWC Company's
DIVISION OF NET INCOME Partner's Capital Statement
J. Woo K. Cheng Total December 31, 2020
15000 A. Lingyu
Capital, January 1 48000
add Net Income 17400
3000 Less Drawings -23000
2500 Capital, December 31 42400
10300
3000 2500 25300
-2400
-2400
-7200
600 100 18100
LWC Company's
tner's Capital Statement
December 31, 2020
J. Woo K. Cheng Total
30000 25000 103000
600 100 18100
-14000 -10000 -47000
16600 15100 74100
a. Date Description Ref Dr Cr
1 Pinkston 9000
Terrerl 9000
2 C. Lamar 16000
Terrel 16000
3 Cash 62000 Total capital of existing Partnership
G. Donley 4000 Investment by Terrell
C. Lamar 3200 Total capital of existing new Partnersh
J. Pinkston 800
Terrell 54000 Terrel capital credit
4 Cash 42000 Investment by new partner, Terrell
G. Donley 3000 Terrel capital credit
C. Lamar 2400 Bonus to old partner
J. Pinkston 600
Terrell 48000 Total capital of existing partnership
Investment by Atchley
Total capital of new partnership
Terrell Credit
Investment by new partner
Terrell capital credit
Bonus to new partner
b. Total capital after admission 160000
Total capital before admission 118000
Cash investmen by Terrell 42000
Decrease in C. Lamar Equity 6000
C. Lamar Income ratio 40%
Bonus new partner 15000
al of existing Partnership 118000
t by Terrell 62000
al of existing new Partnership 180000
54000
t by new partner, Terrell 62000
-54000
8000
al of existing partnership 118000
t by Atchley 42000
al of new partnership 160000
48000
t by new partner 42000
48000
ew partner 6000
