Chapter 12

Exercise 12-3

Angela Moss and Autumn Barber organize a partnership on January 1. Moss's initial net investment is $75,000, consisting of cash ($17,500), equipment ($82,500), and a note payable reflecting a bank loan for the new business ($25,000). Barber's initial investment is cash of $31,250. These amounts are the values agreed on by both partners. Prepare journal entries to record (1) Moss's investment and (2) Barber's investment.

Exercise 12-5

Kramer and Knox began a partnership by investing $60,000 and $80,000, respectively. The partners agreed to share net income and loss by granting annual salary allowances of $50,000 to Kramer and $40,000 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally.

  1. Determine the partners' shares of Kramer and Knox given a first-year net income of $98,800.
  2. Determine the partners' shares of Kramer and Knox given a first-year net loss of $16,800.

Check  (2) Kramer, $(4,400)

Exercise 12-7

The partners in the Biz Partnership have agreed that partner Mandy may sell her $100,000 equity in the partnership to Brittney, for which Brittney will pay Mandy $85,000. Present the partnership's journal entry to record the sale of Mandy's interest to Brittney on September 30.

Exercise 12-8

The Struter Partnership has total partners' equity of $510,000, which is made up of Main, Capital, $400,000, and Frist, Capital, $110,000. The partners share net income and loss in a ratio of 80% to Main and 20% to Frist. On November 1, Madison is admitted to the partnership and given a 15% interest in equity and a 15% share in any income and loss. Prepare the journal entry to record the admission of Madison under each of the following separate assumptions: Madison invests cash of (1) $90,000; (2) $120,000; and (3) $80,000.

Exercise 12-10

Turner, Roth, and Lowe are partners who share income and loss in a 1:4:5 ratio. After lengthy disagreements among the partners and several unprofitable periods, the partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $126,000; total liabilities, $78,000; Turner, Capital, $2,500; Roth, Capital, $14,000; and Lowe, Capital, $31,500. The cash proceeds from selling the assets were sufficient to repay all but $28,000 to the creditors.

  1. Calculate the loss from selling the assets.
  2. Allocate the loss from part a to the partners.
  3. Determine how much, if any, each partner should contribute to the partnership to cover any remaining capital deficiency.

Check  (b) Lowe, Capital after allocation, $(6,500)

Exercise 12-11

Assume that the Turner, Roth, and Lowe partnership of Exercise 12-10 is a limited partnership. Turner and Roth are general partners and Lowe is a limited partner. Determine how much, if any, each partner should contribute to the partnership to cover any remaining capital deficiency. (Round amounts to the nearest dollar.)