PROBLEM I

Eritrea Ethiopia El Salvador

Capital balances 100,000 150,000 200,000
Net income 70,000 42,000 28,000
Undervaluation of inventory 10,000 6,000 4,000
Capital balances before settlement to Erit 180,000 198,000 232,000
Settlement to Eritrea (195,000) - -
Bonus to Eritrea 15,000 (9,000) (6,000)
Capital balances after retirement - 189,000 226,000

Eritrea, Capital 180,000

Ethiopia, Capital 9,000
El Salvador, Capital 6,000
Cash 195,000

PROBLEM II
A. Spade, Capital 120,000
Jack, Capital 120,000
To record withdrawal of Spade and purchase by Jack of Spade's interest.

B. Spade, Capital 120,000

Ace, Capital 24,000
Jack, Capital 36,000
Cash 180,000
To record withdrawal of Spade with bonus from remaining partners.

C. Land 20,000
Ace, Capital 4,000
Jack, Capital 6,000
Spade, Capital 10,000
To record asset revaluation.

Spade, Capital 130,000

Ace, Capital 20,000
Jack, Capital 30,000
Cash 60,000
Land 120,000
To record withdrawal of Spade with bonus from remaining partners.
D. Land 40,000
Ace, Capital 8,000
Jack, Capital 12,000
Spade, Capital 20,000
To record asset revaluation.

Spade, Capital 140,000

Ace, Capital 4,000
Jack, Capital 6,000
Land 100,000
Note Payable 50,000
To record withdrawal of Spade with bonus from remaining partners.
PROBLEM III

Capital balances before admission

Capital transfer to WW (1/6)
Balances
Equalization of old partners' capital
Balances
Net Profit
Drawings (2 months)
Capital balances before WW's investment

XX Capital 201,150
YY Capital 201,650
ZZ Capital 201,650
Total 604,450
Divide by: 2/3
Total Agreed Capital 906,675
Multiply by: WW interest 1/3
Capital Credit of WW 302,225
Contributed Capital of WW 121,150
Cash to be invested by WW 181,075

PROBLEM IV
A.
Unadjusted capital balances
Overvaluation of Marketable Securities
Allowance For Bad Debts
Adjusted capital balance before admission
Investment by Green
Capital balances after admission of Green

B. Red, Capital
White, Capital
Blue, Capital
Marketable Securities
To record adjustment on Marketable Securities.

Red, Capital
White, Capital
Blue, Capital
Allowance For Bad Debts
To record provision for bad debts.

Cash
Green, Capital
To record investment of Green.
XX YY ZZ WW Total
360,000 225,000 135,000 - 720,000
(60,000) (37,500) (22,500) 120,000 -
300,000 187,500 112,500 120,000 720,000
(100,000) 12,500 87,500 - -
200,000 200,000 200,000 120,000 720,000
3,150 3,150 3,150 3,150 12,600
(1,500) (2,000) (1,500) (2,000) (7,000)
201,650 201,150 201,650 121,150 725,600

Red White Blue Green Total

175,000 100,000 45,000 - 320,000
(12,500) (7,500) (5,000) - (25,000)
(12,500) (7,500) (5,000) - (25,000)
150,000 85,000 35,000 - 270,000 2/3
- - - 135,000 135,000 1/3
150,000 85,000 35,000 135,000 405,000

12,500
7,500
5,000
25,000

12,500
7,500
 5,000
25,000

135,000
135,000