CHAPTER 12

PROBLEMS: SET B
P12-1B The post-closing trial balances of two proprietorships on January 1, 2017, are Prepare entries for formation
presented below. of a partnership and a
Utech Company Flott Company balance sheet.

Dr. Cr. Dr. Cr. (LO 1, 2)

Cash $ 10,000 $ 8,000
Accounts receivable 18,000 30,000
Allowance for doubtful accounts $ 2,000 $ 3,000
Inventory 35,000 20,000
Equipment 60,000 35,000
Accumulated depreciation—equipment 28,000 15,000
Notes payable 20,000
Accounts payable 30,000 40,000
Utech, capital 43,000
Flott, capital 35,000
$123,000 $123,000 $93,000 $93,000
Utech and Flott decide to form a partnership, Commander Company, with the following
agreed upon valuations for noncash assets.
Utech Company Flott Company
Accounts receivable $18,000 $30,000
Allowance for doubtful accounts 2,500 4,000
Inventory 38,000 25,000
Equipment 35,000 18,000
All cash will be transferred to the partnership, and the partnership will assume all the
liabilities of the two proprietorships. Further, it is agreed that Utech will invest an addi-
tional $3,500 in cash, and Flott will invest an additional $16,000 in cash.
Instructions
(a) Prepare separate journal entries to record the transfer of each proprietorship’s assets
and liabilities to the partnership. (a) Utech, Capital
(b) Journalize the additional cash investment by each partner. $48,500 Flott, Capital
(c) Prepare a classified balance sheet for the partnership on January 1, 2017. $37,000

(c) Total assets $195,000

P12-2B At the end of its first year of operations on December 31, 2017, RKC Company’s
accounts show the following.
Journalize divisions of net
Partner Drawings Capital income and prepare a
Riles $15,000 $40,000 partners’ capital statement.
Kinder 10,000 25,000 (LO 2)
Crifui 5,000 15,000
The capital balance represents each partner’s initial capital investment. Therefore, net
income or net loss for 2017 has not been closed to the partners’ capital accounts.
Instructions
(a) Journalize the entry to record the division of net income for 2017 under each of the
independent assumptions shown below.
(1) Net income is $50,000. Income is shared 5:3:2.
(2) Net income is $43,000. Riles and Kinder are given salary allowances of $15,000
and $10,000, respectively. The remainder is shared equally. (a) (1) Riles
(3) Net income is $34,000. Each partner is allowed interest of 10% on beginning $25,000 (2)
cap- ital balances. Riles is given a $20,000 salary allowance. The remainder is Riles $21,000
shared equally. (3) Riles $26,000
(b) Prepare a schedule showing the division of net income under assumption (3) above.
(c) Prepare a partners’ capital statement for the year under assumption (3) above.

P12-3B The partners in Newman Company decide to liquidate the firm when the balance (c) Riles $51,000
sheet shows the following. Prepare entries and
schedule of cash payments
in liquida- tion of a
partnership
(LO 3)
2 12 Accounting for Partnerships

NEWMAN COMPANY
Balance Sheet
April 30, 2017
Assets Liabilities and Owners’ Equity
Cash $ 30,000 Notes payable $ 20,000
Accounts receivable 25,000 Accounts payable 30,000
Allowance for doubtful accounts (2,000) Salaries and wages payable 2,500
Inventory 35,000 Mallory, capital 28,000
Equipment 20,000 Bosco, capital 13,650
Accumulated depreciation—equipment (8,000) Renteria, capital 5,850
$100,000 $100,000

(a) Loss on realization
$15,000 Cash paid: to
Mallory
$20,500; to Renteria
$2,850
Journalize admission of a
partner under different
assumptions.
(LO 4)
(a) (1) Edelman, Capital
$5,000
(2)Edelman $8,000
(3)Edelman $34,000
(4)Edelman $16,000
The partners share income and loss 5:3:2. During the process of liquidation, the transac-
tions below were completed in the following sequence.
1. A total of $55,000 was received from converting noncash assets into cash.
2. Gain or loss on realization was allocated to partners.
3. Liabilities were paid in full.
4. Cash was paid to the partners with credit balances.
Instructions
(a) Prepare a schedule of cash payments.
(b) Prepare the entries to record the transactions.
(c) Post to the cash and capital accounts.
*P12-4B At April 30, partners’ capital balances in YBG Company are: Younger $30,000,
Beyer $16,000, and Giger $10,000. The income-sharing ratios are 5:3:2, respectively. On
May 1, the YBGE Company is formed by admitting Edelman to the firm as a partner.
Instructions
(a) Journalize the admission of Edelman under each of the following independent
assumptions.
(1) Edelman purchases 50% of Giger’s ownership interest by paying Giger $4,000 in
cash.
(2) Edelman purchases 50% of Beyer’s ownership interest by paying Beyer $10,000
in cash.
(3) Edelman invests $29,000 cash in the partnership for a 40% ownership interest
that includes a bonus to the new partner.
(4) Edelman invests $24,000 in the partnership for a 20% ownership interest, and
bonuses are given to the old partners.
(b) Beyer’s capital balance is $25,000 after admitting Edelman to the partnership by
investment. If Beyer’s ownership interest is 25% of total partnership capital, what
were (1) Edelman’s cash investment and (2) the total bonus to the old partners?

*P12-5B On December 31, the capital balances and income ratios in DUYP Company are
as follows.

Journalize withdrawal of Partner Capital Balance Income Ratio

a partner under different Dunlap $100,000 60%
assumptions. Yevak 51,000 30
(LO 4) Piper 28,000 10

Instructions
(a) Journalize the withdrawal of Piper under each of the following independent
assumptions.
(a) (1) Yevak, Capital $14,000 (1) Each of the remaining partners agrees to pay $15,000 in cash from personal
(2) Yevak, Capital $28,000 funds to purchase Piper’s ownership equity. Each receives 50% of Piper’s equity.
(3) Bonus $6,000 (2) Yevak agrees to purchase Piper’s ownership interest for $22,000 in cash.
(4) Bonus $9,000 (3) From partnership assets, Piper is paid $34,000, which includes a bonus to the
retiring partner.
(4) Piper is paid $19,000 from partnership assets. Bonuses to the remaining
partners are recognized.
(b) If Yevak’s capital balance after Piper’s withdrawal is $57,000, what were (1) the total
bonus to the remaining partners and (2) the cash paid by the partnership to Piper?