ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.13P
To determine
New partner investment: A new partner may acquire a share of the
Three cases of investment are possible.
- The new partner investment equals to the new partner’s proportion of the partnership’s book value.
- The investment is more than new partner’s proportion of the partnership’s book value. This indicates that the partnership’s prior net assets are undervalued on the books or the unrecorded
goodwill exists. - The investment is for less than the new partner’s proportion of the partnership’s book value. This suggests that partnership’s prior net assets are overvalued on its books or the new partner may be contributing goodwill in addition to the other assets.
the amount new partner S must contribute in cash or other assets in each of the given cases.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume the partnership income-sharing agreement calls for income to be divided with a salary of $41,000 to Coburn and
$36,000 to Webb, interest of 10% on beginning capital, and the remainder divided 50%-50%. Prepare the journal entry to record
the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Income Summary
Coburn, Capital
Webb, Capital
Debit
68000
Credit
33850
32150
In each of the following independent liquidating distributions in which the partnership also liquidates, determine the amount and character of any gain or loss to be recognized by each partner and the basis of each asset (other than cash) received. In each case, assume that distributions of hot assets are proportionate to the partners. Be sure to explain your rationale.
a. Landon has a partnership basis of $40,000 and receives a distribution of $50,000 in cash.
b. Mark has a partnership basis of $50,000 and receives $20,000 of cash and a capital asset with a basis to the partnership of $25,000 and a fair market value of $40,000.
The ABC Partnership is to be liquidated and you have been hired to prepare a Schedule of Cash Payments for the partnership as well as all required journal entries. Partners Alexa, Bitsy, and Coco share income and losses in the ratio of 4:3:3, respectively. Assume the following: 1. The noncash assets were sold for $70,000. 2. Liabilities were paid in full. 3. The remaining cash was distributed to the partners. (If any partner has a capital deficiency, assume that the partner is unable to make up for the capital deficiency.) Instructions Use the above information.
a. Prepare a complete Schedule of Cash Payments.
b. Prepare all necessary journal entries on the journal page below.
ABC PARTNERSHIP Schedule of Cash Payments
Balances Before Liquidation: Item Cash $25,000 + Noncash Assets $150,000 = Liabilities $50,000 + Alexa Capital $25,000 + Bitsy Capital $35,000 + Coco Capital $65,000
Chapter 15 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 15 - Prob. 15.1QCh. 15 - Prob. 15.2QCh. 15 - Prob. 15.3QCh. 15 - Prob. 15.4QCh. 15 - Under what circumstances would a partner’s capital...Ch. 15 - Prob. 15.6QCh. 15 - Prob. 15.7QCh. 15 - Prob. 15.8QCh. 15 - Prob. 15.9QCh. 15 - Prob. 15.10Q
Ch. 15 - Prob. 15.11QCh. 15 - Prob. 15.12QCh. 15 - Prob. 15.13QCh. 15 - Prob. 15.14QCh. 15 - Prob. 15.15AQCh. 15 - Prob. 15.16BQCh. 15 - Prob. 15.1CCh. 15 - Prob. 15.2CCh. 15 - Prob. 15.3CCh. 15 - Prob. 15.1.1ECh. 15 - Prob. 15.1.2ECh. 15 - Prob. 15.1.3ECh. 15 - Prob. 15.1.4ECh. 15 - Multiple-Choice on Initial Investment [AICPA...Ch. 15 - Prob. 15.2ECh. 15 - Prob. 15.3ECh. 15 - Prob. 15.4ECh. 15 - Prob. 15.5ECh. 15 - Prob. 15.6ECh. 15 - Prob. 15.7ECh. 15 - Prob. 15.8.1ECh. 15 - Prob. 15.8.2ECh. 15 - Prob. 15.8.3ECh. 15 - Prob. 15.8.4ECh. 15 - Prob. 15.8.5ECh. 15 - Prob. 15.8.6ECh. 15 - Prob. 15.8.7ECh. 15 - Prob. 15.8.8ECh. 15 - Prob. 15.9ECh. 15 - Retirement of a Partner On January 1, 20X1, Eddy...Ch. 15 - Prob. 15.11PCh. 15 - Prob. 15.12PCh. 15 - Prob. 15.13PCh. 15 - Prob. 15.14PCh. 15 - Withdrawal of a Partner under Various Alternatives...Ch. 15 - Prob. 15.16.1PCh. 15 - Prob. 15.16.2PCh. 15 - Prob. 15.16.3PCh. 15 - Prob. 15.16.4PCh. 15 - Prob. 15.16.5PCh. 15 - Prob. 15.16.6PCh. 15 - Prob. 15.16.7PCh. 15 - Prob. 15.16.8PCh. 15 - Prob. 15.16.9PCh. 15 - Prob. 15.17PCh. 15 - Prob. 15.18PCh. 15 - Initial investments and Tax Bases [AICPA Adapted]...
Knowledge Booster
Similar questions
- Partners A, B, and C share income and losses in the ratio of 4:3:3, respectively. Assume the following: 1. The noncash assets were sold for $75,000. 2. Liabilities were paid in full. 3. The remaining cash was distributed to the partners. (If any partner has a capital deficiency, assume that the partner is unable to make up the capital deficiency.) ABC PARTNERSHIP Schedule of Cash Payments Noncash A B Item Cash Assets = Liabilities + Capital+ Capital Capital Balances before liquidation 25,000+ 150,000 = 50,000 +25,000 + 35,000+ 65,000 9 How much cash will partner B receive from the liquidation? 10 How much cash will partner C receive from the liquidation?arrow_forwardThe following condensed balance sheet is for the partnership of Ludolf, Sambal, and Urad, who share profits and losses in the ratio of 6.2.2, respectively. Cash Other assets Total assets Required A $ 52,000 152,000 Required $ 204,000 Required: a. Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time. b. For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation? Complete this question by entering your answers in the tabs below. Liabilities Ludolf, capital Sambal, capital Urad, capital Total liabilities and capital Other assats must be sold For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation? $ 38,000 72,000 72,000 22,000 $ 204,000 < Required A BYarrow_forwardProblem-solving Admissionby Purchase of Interest or Investment of AssetsAngeles. Bondoc and Campos have equities in a partnership as follows: Angeles 300,000 Bondoc 750,000 Campos 700.000 and share of profits and losses in a ration of 5.3.2, respectively. The partners have agreed to admit Dantes to the partnership REQUIRED Prepare the journal entries to record the admission of Dantes to the partnership under each of the following assumptions.1. Dantes paid Angeles P450.000 for his full interest 2. Dantes invested P500,000 for a 25% interest, and bonus is recorded for Dantes 3 Dantes invested P600,000 for a 20% interest, and bonus is recorded for the old partners.arrow_forward
- Admitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $116,000 and $197,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $78,000 cash to the partnership, for which she is to receive an ownership equity of $101,000. All partners share equally in income. a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $23,000. If an amount box does not require an entry, leave it blank. b. What are the capital balances of each partner after the admission of the new partner? Partner ▼ Elayne Summers Murv Newcomb Rose Clayton Balance c. Why are tangible assets adjusted to current market prices prior to admitting a new partner? Tangible assets should be adjusted to current market prices so that the new partner any gains or losses from changes in market prices prior to being admitted. For example,…arrow_forwardAdmitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $93, 000 and $ 130,000, respectively. Lewan Gorman is to be admitted to the partnership, contributing $62,000 cash to the partnership, for which he is to receive an ownership equity of $81,000. All partners share equally in income. Question Content Area a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $19,000. If an amount box does not require an entry, leave it blank. blank Cash 62,000 Lewan Gorman, Drawing 81,000 Harry Barge, Capital 19,000 Lewan Gorman, Capital 81,000 Question Content Area b. What are the capital balances of each partner after the admission of the new partner? Partner Balance Grayson Jackson Sfill in the blank a4bbb009305cfea_1 155,000 Harry Barge Sfill in the blank a4bbb009305 cfea_2 11,000 Lewan Gorman Sfill in the blank a4bbb009305cfea_3…arrow_forwardAdmitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $82,000 and $131,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $55,000 cash to the partnership, for which she is to receive an ownership equity of $72,000. All partners share equally in income. a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $17,000. If an amount box does not require an entry, leave it blank. Cash Elayne Summers, Capital Murv Newcomb, Capital Rose Clayton, Capital Feedback ►Check My Work b. What are the capital balances of each partner after the admission of the new partner? Partner Elayne Summers Murv Newcomb Rose Clayton 55,000 $ Balance 94,500 X $ 143,500 X 30,000 Xarrow_forward
- = Admitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $99,000 and $149,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $66,000 cash to the partnership, for which she is to-receive an ownership equity of $86,000. All partners share equally in income. a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $20,000. If an amount box does not require an entry, leave it blank. b. What are the capital balances of each partner after the admission of the new partner? Partner ▼ Elayne Summers Murv Newcomb Rose Clayton $ Balance c. Why are tangible assets adjusted to current market prices prior to admitting a new partner? Tangible assets should be adjusted to current market prices so that the new partner being admitted. For example, if the market price of land doubled prior to admitting…arrow_forwardAssume that the assets and liabilities are fairly valued on the balance Sheet and the partnership decides to admit Mac as a new partner, with a 20% interest. No goodwill or bonus is to be recorded. How much Mac should contribute in cash or other assets? (Please Refer to the Image Uploaded)arrow_forwardProblem 1. Alucard and Chou organized their partnership on 01/01/19. The following entries were made into their capital accounts during 2019. Required: If partnership profits for the year equaled P66,000, indicate the allocations between the partners under the following independent profit-sharing allocation conditions: Interest of 10% is allocated on weighted average capital balance and the remainder is divided equally. A salary of P9,000 will be allocated to Chou; 10% interest on ending capital is allocated to the partners; remainder is divided 60/40 to Alucard and Chou, respectively. Salaries are allocated to Alucard and Chou in the amount of P10,000 and P15,000, respectively and the remainder is allocated in the proportion to weighted average capital balances. A bonus of 10% of partnership profits after bonus is credited to Alucard, a salary of P35,000 is allocated to Chou, a P20,000 salary is allocated to Alucard, 10% interest on weighted capital is allocated, and remainder is…arrow_forward
- Admitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $87,000 and $148,000, respectively. Austin Neel is to be admitted to the partnership, contributing $58,000 cash to the partnership, for which he is to receive an ownership equity of $75,000. All partners share equally in income. a. Journalize the entry to record the admission of Neel, who is to receive a bonus of $17,000. For a compound transaction, if an amount box does not require an entry, leave it blank. b. What are the capital balances of each partner after the admission of the new partner? Partner Brad Paulson Drew Webster Austin Neel Balance c. Why are tangible assets adjusted to current market prices prior to admitting a new partner? Tangible assets should be adjusted to current market prices so that the to being admitted. does not share in any gains or losses from changes in market pricesarrow_forwardIn each of the following independent liquidating distributions in which the partnership also liquidates determine the amount and character of any gain or loss to be recognized by each partner and the basis of each asset (other than cash) received. In each case, assume that distributions of hot assets are proportionate to the partners. Be sure to explain your rationale. c. Neil has a partnership basis of $100,000 and receives $40,000 of cash, inventory with a basis to the partnership of $30,000, and a capital asset with a partner- ship basis of $20,000. The inventory and capital asset have fair market values of $20,000 and $30,000, respectively. d. Oscar has a partnership basis of $40,000 and receives a distribution of $10,000 of cash and an account receivable with a basis of $0 to the partnership (value is $15,000).arrow_forwardThe Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information: 1. The partnership's trial balance on June 30, 20X1, Is Cash Accounts Receivable (net) Inventory Plant and Equipment (net) Accounts Payable Pen, Capital Evan, Capital Torves, Capital Total Profit and loss percentages Preliquidation capital balances Loss absorption potential (capital balances / loss percent) Decrease highest LAP to next highest: Debit $ 6,800 30,000 22,000 99,700 Decrease LAPS to next highest: $ 158,500 2. The partners share profits and losses as follows: Pen, 50 percent; Evan, 30 percent; and Torves, 20 percent. 3. The partners are considering an offer of $108,000 for the firm's accounts receivable, Inventory, and plant and equipment as of June 30. The $108,000 will be paid to creditors and the partners in Installments, the number and amounts of which are to be negotiated. Required: Prepare a cash distribution plan as of June 30,…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
