SOLUTIONS

Here are your short answer questions explained succinctly:

1. Deductions from Employees' Earnings as Liabilities: Deductions from employees' earnings,

such as taxes and benefits withheld by the employer, are classified as liabilities because the
employer holds these amounts until they are remitted to the appropriate entities, such as
government agencies or pension funds.

2. Distinguishing Salaries and Wages: "Salaries" usually refer to fixed compensation paid to
employees on a regular basis, often on a monthly or annual schedule, while "wages" typically refer
to payments made to hourly or piece-rate workers and are often more variable.

3. Basic (Regular) Pay and Overtime Pay: (i) Basic pay refers to the standard rate of compensation
for regular work hours; (ii) Overtime pay represents additional compensation for work performed
beyond the standard hours, often at a higher rate than basic pay.

4. Reasons for Large Businesses Organizing as Corporations: Most large businesses opt to
organize as corporations due to limited liability for shareholders, perpetual existence, ease of
ownership transfer, and access to capital through the issuance of stock.

5. Significance of Par Value in Stock Issuance: Par designations do not necessarily indicate which
stock is preferable as an investment. Par value is a nominal value set by the corporation and has
little relation to the stock's market value.

6. Preferred Stock and Dividend Safety: While preferred stockholders receive priority in dividend
payments, the assurance of uninterrupted dividends depends on the financial health of the
company. Economic difficulties can impact a company's ability to pay dividends, affecting
preferred stock as well.

7. Factors Influencing Stock Market Price: Market price of a corporation's stock is influenced by
various factors such as company performance, industry trends, economic conditions, company
news, and investor sentiment.

8. Premium on Stock Issuance: Premium on stock issuance does not constitute income. It
represents additional funds received over the par value, typically reflecting investor confidence or
a strong company position.

9. Effects of Stock Repurchase: (a) The repurchase has no effect on revenue or expense for the
period. (b) It reduces total stockholders' equity by the cost of the repurchased shares.

10. Withdrawals and Partnership Net Income: Marsha's net income share may be more or less than
$48,000, depending on the partnership's performance and the specifics of the partnership
agreement.
11. Admission of New Partners: The admission of a new partner through (a) purchase results in a
direct transfer of ownership from an existing partner, while (b) contribution involves the addition
of new resources to the partnership entity.

12. Treatment of Contributed Assets: The delivery equipment should be recorded at its agreed-
upon valuation of $10,000, representing the fair value at the time of contribution, rather than its
historical cost or accumulated depreciation.

If you have further questions or need more detail on any of the topics, feel free to ask!

### Here are your solutions to the provided accounting problems:

#### 14. First Year's Income Distribution

A. If Ratio is Not Included:

- Without a specified ratio, income is typically shared equally.
```
Income Summary 120,000
Hilina, Capital 60,000
Meron, Capital 60,000
```

B. Sharing in a 3:2 Ratio:

```
Income Summary 120,000
Hilina, Capital ($120,000 x 3/5) 72,000
Meron, Capital ($120,000 x 2/5) 48,000
```

C. Sharing in Ratio of Original Investments:

Income is divided based on the agreed 3:6 ratio.
```
Income Summary 120,000
Hilina, Capital ($120,000 x 1/3) 40,000
Meron, Capital ($120,000 x 2/3) 80,000
```

D. 10% Interest Allowed, Remainder Equally:

```
Hilina, Capital:
Original Investment 200,000 + (200,000 x 10%) = 220,000
Meron, Capital:
400,000 + (400,000 x 10%) = 440,000

Remaining Income to be Split Equally:

(120,000 - 66,000) / 2 = 27,000
```

#### 15. Participation in Net Income

a) No Agreement Concerning Division:

```
Both share equally:
Chali's share: $30,000
Mulluneh's share: $30,000
```

b) Divided in Ratio of Original Capital Investment:

```
Chali's share: (50,000 / 150,000) * 60,000 = $20,000
Mulluneh's share: (100,000 / 150,000) * 60,000 = $40,000
**c) Only Chali gets an interest of 12% on $15,000 and the rest is equally divided. It is exact
50%/50% division**
Interests : (15,000 12%) + (30,000 12%) = $7,800
Remaining income: $60,000 - $7,800 = $52,200
Chali's share: $29,100
Mulluneh's share: $29,100
```

d) Salary allowances of $15,000 and $30,000 along with the remaining divided equally:
```
Chali's share: $25,000
Mulluneh's share: $35,000
```

#### 16. Admission of Israel to Partnership

a) Purchased Hilina's equity:
```
Cash (Asset) 25,000
Hilina's Equity 25,000
Or
Cash (Asset) 25,000
Capital Partners 25,000
**b) Purchased Getachew's equity:**
Cash (Asset) 18,000
Getachew's Equity 18,000
Or
Cash (Asset) 18,000
Capital Partners 18,000
```

#### 17. Umer's Withdrawal

a) Shiran Tilahun Agreed to Purchase Umer’s Equity:
```
Cash (or Capital) 15,000
Umer’s Equity 15,000
**b) Tilahun Agreed to Purchase All of Umer's Equity:**
Cash (or Capital) 20,000
Umer’s Equity 20,000
```

I will continue with the remaining questions in the next part.