Flemng's Plumbing Supples Balance Sheet December 31, 20-1 Assets Llabiltes $ 13,544 Hotes payable Accounts payable Cash $36,000 Accounts Rcehable $15,280 18,082 Lessalowance for bad detts 20נו 13,560 Total lablitles $ 54,062 Merhandise nventory 89,692 Supples omceequpment Lessaccunulated depreciation 1,286 $14,320 1,100 13,20 5 8,800 Owner's tquiky Store equipnent Lessaccunulated depreciation 2,200 6,600 Ian Flening, captal 83 820 Total assets $37,902 Total lablites and owner's equity $B7,902
Jim Bond, a plumber, has been working for Fleming’s Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a
(a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the
partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet (shown below) are reasonable approximations of market values. Fleming has no knowledge of any uncollectible
(b) Bond will invest $50,000 cash.
(c) Fleming will draw a salary allowance of $50,000 per year, and Bond will
receive $30,000.
(d) Each partner will receive 10% interest on the January 1 balance of his capital account.
(e)
Required
1. Prepare the entries on January 1, 20-2, for the formation of the partnership.
2. Net income for the partnership for 20-2 was $150,000. Prepare the lower
portion of the income statement reporting the allocation of the profits to each partner.
3. In December 20-4, Fleming’s daughter, Penny, graduated from business college and asked to join the business as a partner. She has $30,000 to invest and it is agreed, given Penny’s expertise in accounting, she will be given a capital interest of $36,000. Profits and losses will be shared as follows: I. Fleming, 50%; J. Bond, 30%; P. Fleming, 20%. Prepare the entry for Penny’s investment on January 1, 20-5. Recall from (e) above, the original partnership called for profit sharing, after allocating interest and salaries, of 60% to I. Fleming and 40% to J. Bond.
4. After several years of operations, it is decided to liquidate the partnership. After making closing entries on July 31, 20-9, the following accounts remain open:
Cash $ 20,000
Inventory 150,000
Office Equipment 30,000
Accum.
Store Equipment 22,000
Accum. Depreciation—Store Equipment 15,000
Notes Payable 20,000
Ivan Fleming, Capital 80,000
Jim Bond, Capital 50,000
Penny Fleming, Capital 39,000
(a) On August 1, 20-9, the inventory is sold for $130,000.
(b) On August 3, the office equipment is sold for $10,000.
(c) On August 5, the store equipment is sold for $12,000.
(d) On August 10, the notes payable are paid.
(e) On August 15, the remaining cash is distributed to the partners according to the balances in their capital accounts.
Prepare a statement of partnership liquidation and related
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