CHAPTER 15

Exercise 15-2
Part A (1)

(2)

(3)

Part B

Cash
Accounts Receivable
Office Supplies
Office Equipment
Accounts Payable
Tom, Capital

13,000
8,000
2,000
30,000

Cash
Accounts Receivable
Office Supplies
Land
Accounts Payable
Mortgage Payable
Julie, Capital

12,000
6,000
800
30,000

Tom, Drawing
Cash

15,000

Julie, Drawing
Cash

12,000

Income Summary
Tom, Capital $50,000 ($51,000/$76,000)
Julie, Capital $50,000 ($25,000/$76,000)

50,000

Tom, Capital
Julie, Capital
Tom, Drawing
Julie, Drawing

15,000
12,000

2,000
51,000

5,000
18,800
25,000
15,000
12,000
33,553
16,447

15,000
12,000

TOM AND JULIE PARTNERSHIP

Statement of Changes in Partners' Capital
For the Year Ended December 31, 2004
Capital balances, Jan. 1
Add: Additional investments
Net income allocation
Totals
Less: Withdrawals
Capital balances, Dec. 31

Tom
$
0
51,000
33,553
84,553
15,000
$69,553

15 - 1

Julie
$
0
25,000
16,447
41,447
12,000
$29,447

Total
$
0
76,000
50,000
126,000
27,000
$99,000

Exercise 15-10
1. d

($125,000 + $250,000 - $25,000) = $350,000

2. c

$60,000 is the fair value of the land invested

3. c

$10,000 interest + $14,175 bonus + $6,775 underallocation

4. c

Tom
Jim
John

5. c

$39,000 + $8,000 (share of revalued assets) - $550 *(share of excess paid to Al)

$80,000 - (0.6 $10,000)

$50,000 - (0.4 $10,000)
$60,000

* [$61,200 ($9,000 + $42,000 + $8,000)] 20/80

15 - 2

ANSWERS TO PROBLEMS
Problem 15-1
1. If the agreement does not provide for a profit-sharing ratio, the UPA provides that profits are to be
shared equally. Therefore Day and Night would each get $34,200 allocation.
2. Day Allocation 0.60 $68,400 =
Night Allocation 0.40 $68,400 =
Total

$41,040
27,360
$68,400
Day
$75,000
56,250
(18,750)
$112,500

3. Capital Balance 1/1

+ Investments
- Withdrawals
Balance 12/31

Night
$37,500
18,750
(9,375)
$46,875

Total
$112,500
75,000
(28,125)
$159,375

Profit Allocation:
$112,500
$68,400 = $48,282
Day:
$159,375
$46,875
$68,400 =
Night:
20,118
$159,375
$68,400

4. 1/1 Balance
Withdrawal 4/1
Investment 6/1
Investment 11/1
Average Balance
1/1 Balance
Investment 7/1
Withdrawal 10/1
Average Balance

$18,750
37,500
18,750

$18,750
9,375

Profit Allocation:
$85,938
$68,400 =
Day:
$130,470
$44,532
$68,400 =
Night:
$130,470
Total

Day
$75,000
56,250
93,750
112,500

Portion of Year
Maintained

3/12

2/12

5/12

2/12
12/12

Night
$37,500
56,250
46,875

$45,054
23,346
$68,400

15 - 3

6/12
3/12
3/12
12/12

Weighted
Average
$18,750
9,375
39,063
18,750
$85,938
$18,750
14,063
11,719
$44,532

Average
Balance

$85,938*

44,532**
$130,470

Problem 15-1 (continued)

5. Interest on average balance
Salaries
Remainder of $25,579 divided equally
*
**

Day
*$ 12,891
15,000
27,891
12,790
$40,681

0.15 $85,938 = $12,891 (see part 4)

0.15 $44,532 = $6,680 (see part 4)

15 - 4

Night
**$ 6,680
8,250
14,930
12,789
$27,719

Total
$ 19,571
23,250
42,821
25,579
$68,400

Problem 15-9
Part A

DISCOUNT PARTNERSHIP
Worksheet to Adjust and Combine the Partnerships' Accounts
June 30, 2008
Up & Down
Trial Balance
June 30, 2008

Cash
Accounts Receivable
Allowance for Doubtful
Accounts
Merchandise Inventory
Land
Buildings & Equipment
Allowance For Depreciation
Prepaid Expenses
Accounts Payable
Notes Payable
Accrued Expenses
Up, Capital

$25,000
90,000

Back & Forth

Trial Balance
June 30, 2008
$20,000
140,000
6,000
115,000
35,000
125,000

24,000
6,000

(2)
400
(3) 28,750

61,000

(1) 1,600

(4) 15,040

54,000
74,000
44,000

Back, Capital

65,000

Forth, Capital

139,000
$443,000

100,040
14,000

144,000

$406,000

9,200
323,750
60,000
205,000

8,000
42,000
65,000
34,000
95,000

$406,000

Discount Stores
Beginning Balances
$45,000
230,000

2,000
180,000
25,000
80,000

Down, Capital

Four Partners'
Adjusting and
Combining Entries

(5) 4,000
(1)
(4)
(1)
(4)
(5)
(6)
(7)
(5)
(6)

640
6,016
960
9,024
1,200
1,200
3,845
2,800
2,800

(6) 4,000
(7) 1,656

100,000
139,000
82,000
90,000

(7)

984

135,000

(2)
120
(3) 8,625

67,500

(2)
280
(3) 20,125
(7) 3,695

157,500

$443,000

Goodwill

(7) 2,490
$60,125

15 - 5

$60,125

2,490
$880,240

$880,240

Problem 15-9 (continued)

(1,2)

To adjust allowance for doubtful accounts to 4% of receivables.

Up and Down: $90,000 0.04 = $3,600 - $2,000 = $1,600 credit
Back and Forth: $140,000 0.04 = $5,600 - $6,000 = $400 debit

(3)

To adjust inventory to FIFO valuation method 0.80 X = $115,000

X = $143,750 - $115,000 = $28,750

(4)

To adjust the allowance for depreciation account to an accumulation of depreciation for 3 years computed by the double-declining
balance method
Desired accumulated depreciation balance: $16,000 + $12,800 + $10,240*
Depreciation provided
Adjustment needed
* $80,000 0.20 = $16,000
$64,000 0.20 = $12,800
$51,200 0.20 = $10,240

(5)
(6)
(7)

$39,040
24,000
$15,040

To record unrecorded merchandise purchase

To record vacation pay accrual ($200 10 2)
To adjust capital account as agreed
Unadjusted Capital Balances
Net Adjustments
Adjusted Capital Balance
Opening Capital Balances*
Distribution of Goodwill
( ) debit
* Up
$450,000
Down $450,000
Back $450,000
Forth $450,000

Up
$95,000
(6,656)
88,344
90,000
$1,656

Down
$144,000
(9,984)
134,016
135,000
$984

0.20 = $90,000
0.30 = $135,000
0.15 = $67,500
0.35 = $157,500
15 - 6

Back
$65,000
6,345
71,345
67,500
$(3,845)

Forth
$139,000
14,805
153,805
157,500
$3,695

Total
$443,000
4,510
447,510
450,000
$2,490

(0.20 + 0.30)X = $225,000

X = $450,000

15 - 7

Problem 15-9 (continued)

Part B

Computation of Cash Settlement Between Partners

Between
Up & Down
Up

Total
Adjusted Capital Balances Excluding Goodwill
Capital in Excess of Book Value
Opening Capital Balances
Settlement Between Parties

$222,360
2,640
225,000
225,000
$0

$88,344
1,056
89,400
90,000
$600

$2,640 0.40 = $1,056

$2,640 0.60 = $1,584

15 - 8

Down

Total

$134,016
1,584
135,600
135,000
$(600)

$225,150
(150)
225,000
225,000
$0

Between
Back & Forth
Back
$71,345
(45)
71,300
67,500
$(3,800)

($150) 0.30 = ($45)

($150) 0.70 = ($105)

Forth
$153,805
(105)
153,700
157,500
$3,800