Accounting for Special Transactions and Business Combinations

1. A 6. A 11. D
2. C 7. A 12. B
3. C 8. D 13. C
4. A 9. A 14. C
5. A 10. C 15. A

Activity 1

Requirement A

(a) A, Capital 40,000

Allowance for uncollectible Account 40,000
(b) Inventory 20,000
A, Capital 20,000
(c) B, Capital 20,000
Mortgage 20,000
(d) B, Capital 50,000
Accumulated Depreciation 50,000
(e) Notes Payable 30,000
A, Capital 30,000

Adjusted Balances

A B
Cash 200,000
Accounts Receivable 100,000
Allowance for Uncollectible (40,000)
Accounts
Inventory 180,000
Land 100,000
Building 240,000
Accumulated Depreciation (50,000)
Total 440,000 290,000
Notes Payable 90,000
A,Capital 350,000
B,Capital 270,000
Total 440,000 270,000

Requirement B

Activity 2

A B C Total
Amount being allocated 100,000
Allocation:
1. Salaries 12,000 8,000 20,000
2. Bonus(100,000-20,000)x 10% 8,000 8,000
3. Interest on Capital (100,000x10%)(60,000x10%) 10,000 6,000 12,000 28,000
(120,000x10%)
4. Allocation of remainder: (100,000-20,000-8,000- 17,600 13,200 13,200 44,000
28,000)=44,000;
(44,000x40%);(44,000x30%);(44,000x30%)
As Allocated 47,600 19,200 33,200 100,000

Case #1

A B C Total
Amount Being 100,000
Allocated
Salaries 12,000 8,000 20,000
Interest on 10,000 6,000 12,000 28,000
Capital
Bonus(10%) 10,000 10,000
Profit 16,800 12,600 12,600 42,000
Total 48,800 18,600 32,600 100,000

Case #2

A B C Total (Loss)
Amount Being 10,000
Allocated
Salaries 12,000 8,000 20,000
Interest On 10,000 6,000 12,000 28,000
Capital
 Loss (15,200) (11,400) (11,400) (38,000)
Total 6,800 (5,400) 8,600 10,000

Case #3

A B C Loss
Amount Being (20,000)
Allocated
Salaries 12,000 8,000 20,000
Interest on 10,000 6,000 12,000 28,000
Capital
Loss (27,200) (20,400) (20,400) (68,000)
Total (5,200) (14,400) (400) (20,000)