Jessica Schmitt

Advanced Accounting
14-27
a.
E=.25(270,000 + E)
E = 67,500 + .25E
.75E=67,500
E = $90,000
b.
Implied Value of partnership (36000/.10)
Total Capital after investment (270000+36000)
Goodwill

$360,000
$306,000
$54,000

Allocation of Goodwill:
A (30%)
$16,200
B (10%)
$5,400
C (40%)
$21,600
D(20%)
$10,800
Capital Balances:
A
$20,000
$16,200
$0
$36,200

Original Balance
Goodwill
Investment
Capital Balances

B
$40,000
$5,400
$0
$45,400

C
D
$90,000 $120,000
$21,600 $10,800
$0
$0
$111,600 $130,800

c.
42,000 + goodwill = .20(270,000 + 42,000 + goodwill)
42,000 + goodwill = 62,400 +.20 goodwill
.80 goodwill = 20,4000
Goodwill = 25,500
E capital balance (42000+25,500) =
All other balances would remain the same

$67,500

d.
Total Capital after investment (270000 + 55000)
Amount acquired by E
E capital balance
E payments
E bonus
A (10%)
B (30%)
C (20%)
D (40%)

$1,000
$3,000
$2,000
$4,000

$325,000
20%
$65,000
$55,000
$10,000

Capital Balances:
Original Balance
Investment
Bonus
Capital Balances
e.
C capital balance
C collection (125%)
Bonus paid to C
Bonus from:
A (1/3)
B (1/3)
D (1/3)

A
$20,000
$0
($1,000)
$19,000

B
$40,000
$0
($3,000)
$37,000

C
D
$90,000 $120,000
$0
$0
($2,000) ($4,000)
$88,000 $116,000

A
$20,000
($7,500)
$0
$12,500

B
C
D
$40,000
$90,000 $120,000
($7,500)
$22,500 ($7,500)
$0 ($112,500)
$0
$32,500
$0 $112,500

$90,000
$112,500
$22,500

$7,500
$7,500
$7,500

Capital Balances:
Original Balance
Bonus
Payment
Capital Balances

E
$0
$0
$36,000
$36,000

E
$0
$55,000
$10,000
$65,000

14-31
a.
1/1/2013 Building
Equipment
Cash
O'Donnell, Capital
Reese, Capital

52,000
16,000
12,000
40,000
40,000

12/31/2013 Reese, Capital

O'Donnell Capital
Income Summary

22,000

1/1/2014 Cash
O'Donnell Capital
Reese, Capital
Dunn, Capital

15,000
300
1,700

12/31/2014 O'Donnell Capital

Reese, Capital
Dunn, Capital
O'donnell drawings
Reese drawings
Dunn drawings

Interest (20% of 51700)

15% of 44000 income
60:40 split of remaining 27060
Income
Total
12/31/2014 Income Summary
O'Donnell Capital
Reese, Capital
Dunn, Capital

12,000
10,000

17,000
10,340
5,000
5,000
10,340
5,000
5,000
O'Donnell
10,340
6,600

16,940

Resse

16,236
16,236

10824
10,824

44,000
16,940
16,236
10,824

Capital Balances as of 12/31

O'Donnell
Resse
Initial investment
40,000
40,000
profit allocation
12,000
(22,000)
Dunn's investment
(300)
(1,700)
drawings
(10,340)
(5,000)
profit allocation
16,940
16,236
12/31 balances
58,300
27,536
1/1/2015 Dunn Capital
Postner capital

Dunn

22,824
22,824

Dunn

17,000
(5,000)
10,824
22824

12/31/2015 O'donnell Capital

Resse capital
Postner capital
O'donnell drawings
Reese drawings
Postner drawings

11,660
5,507
5,000

12/31/2015 Income summary

O'Donnell capital
Reese capital
Postner capital

61,000

1/1/2016 Postner capital

O'donnell capital
Reese capital
Cash

33,900
509
2,881

1/1/2013 Building
Equipment
Cash
Goodwill
O'Donnell capital
Reese capital

52,000
16,000
12,000
80,000

12/31/2013 Reese Capital

O'Donnell capital
Income summary

30,000

116,600
5,507
5,000

20,810
24,114
16,076

37,290

b.

80,000
80,000

20,000
10,000

15000 + Goodwill = .2 (150000 +15000 + Goodwill)

15000 + Goodwill = 33000 + .2 goodwill
.8 goodwill =18000
Goodwill = 22,500
1/1/2014 Cash
Goodwill
Dunn capital
12/31/2014 O'Donnell capital
Reese capital
Dunn capital
O'donnell drawings
Reese drawings
Postner drawings

Interest (20% of 100000)

15% of 44000 income

15,000
225,000
37,500
20,000
10,000
7,500
20,000
10,000
7,500
O'Donnell
20,000
6,600

Resse

Dunn

60:40 split of remaining 17400

Total
12/31/2014 Income summary
O'Donnell capital
Reese capital
Postner capital

26,600

10,440
10,440

44,000
26,600
10,440
6,960

Capital Balances as of 12/31

O'Donnell
Resse
Initial investment
80,000
80,000
profit allocation
20,000
(30,000)
Additional investment
drawings
(20,000)
(1,000)
profit allocation
26,600
10,440
12/31 balances
106,600
50,440
1/1/2015 Goodwill
O'Donnell capital
Reese capital
Dunn capital

26,588

1/1/2015 Dunn Capital

Postner Captial

46,000

12/31/2015 O'donnell Capital

Resse capital
Postner capital
O'donnell drawings
Reese drawings
Postner drawings

22,118
12,800
9,200

Interest (20% of 110588)

15% of 61000 income
60:40 split of remaining 29732
Total

12/31/2015 Income summary

O'Donnell capital
Reese capital
Postner capital

6960
6,960

Dunn

37,500
(7,500)
6,960
36960

3,988
13,560
9,040

46,000

22,118
12,800
9,200
O'Donnell
22,118
9,150
31,268

Resse

17,839
17,839

Postner

11893
11,893

61,000
31,268
17,839
11,893

Capital Balances as of 12/31/15

O'Donnell
Resse
12/31/14 balances
106,600
50,440
Adjustment for goodwill
3,988
13,560

Postner
36,960
9,040

drawings
profit allocation
12/31/15 balances

(22,118)
31,268
119,738

1/1/2016 Goodwill
O'Donnell capital
Reese capital
Postner capital

14,321

1/1/2016 Postner capital

Cash

53,562

(12,800)
17,839
69,039

2,148
7,304
4,869

53,562

(9,200)
11,893
48693

15-28
Collection of AR (66000-51000)
Sale of inventory
Liquidation expenses
Gain from Jan credit memorandum
Machinery and equipment (Net)
Poten. Unrecoded liab. & anticipated expenses
Totals

Profit and loss ratio

Actual loss Pot. Loss

$15,000
$14,000
$2,000
($3,000)
$189,000
$10,000
$28,000 $199,000

Safe Installment Payments to Partners

31-Jan
Total
100%

Preliquidation capital balances

Add (deduct) loans
January Losses
Equity of partnership 1/31
Potential losses
Potential loss
Safe payments to partners

$282,000
($10,000)
$272,000
($28,000)
$244,000
($199,000)
$45,000
$0
$45,000

Van
50%

Bakel
30%

$118,000
($30,000)
$88,000
($14,000)
$74,000
($99,500)
($25,500)
$25,500
$0

$90,000
$20,000
$110,000
($8,400)
$101,600
($59,700)
$41,900
($15,300)
$26,600

Safe Installment Payments to Partners

28-Feb
Total
Van
Bakel
Equity of partnership 1/31
$244,000 $74,000 $101,600
Safe Payments
($45,000)
$0 ($26,600)
February liqyidation expenses
($3,000) ($1,500)
($900)
Equity of partnership 2/28
$196,000 $72,500 $74,100
Potential liabilities and expenses
($6,000) ($3,000) ($1,800)
Potential loss on machinery and equipment
($189,000) ($94,500) ($56,700)
$1,000 ($25,000) $15,600
Potential loss
$0 $25,000 ($15,000)
Safe payments to partners
$1,000
$0
$600
Safe Installment Payments to Partners
31-Mar
Total
Van
Bakel
Equity of partnership 2/28
$196,000 $72,500 $74,100
Safe Payments
($1,000)
$0
($600)
Loss on sale of machinery and equipment
($43,000) ($21,500) ($12,900)
Liquidation expensess
($5,000) ($2,500) ($1,500)
Safe payments to partners
$147,000 $48,500 $59,100

Cox
20%
$74,000
$0
$74,000
($5,600)
$68,400
($39,800)
$28,600
($10,200)
$18,400

Cox
$68,400
($18,400)
($600)
$49,400
($1,200)
($37,800)
$10,400
$400
$10,800

Cox
$49,400
($400)
($8,600)
($1,000)
$39,400

15-31
a.

Partner
Wingler
Norris
Rodgers
Guthrie

Capital
Balance/loss
allocation
120,000/.30
88,000/.10
109,000/.20
60,000/.40

Max loss that can

be absorbed
400,000
880,000
545,000
150,000

Partner
Wingler
Norris
Rodgers

Capital
Balance/loss
allocation
75,000/(30/60)
73,000/(10/60)
79,000 (20/60)

Max loss that can

be absorbed
150,000
438,000
237,000

Partner
Norris
Rodgers

Capital
Balance/loss
allocation
48,000/(10/30)
29,000/(20/30)

Max loss that can

be absorbed
144,000
43,500

Wingler

Norris

Beginning balances
loss of $150,000 (30:10:20:40)
Step one balances
Loss of $150,000 (30:10:20)
Step two balances
Loss of $43,500 (10:20)
Step three balances

$120,000
($45,000)
$75,000
($75,000)
$0
$0
$0

$88,000
($15,000)
$73,000
($25,000)
$48,000
($14,500)
$33,500

Predistribution Plan:
Payment of all liabilities and liquidation expenses have to be assured
$33,500 goes to Norris
Then, $43,500 is allocated to Norris at 10/30 and Rodgers at 20/30
Next, $150,000 is allocated to Wingler at 30/60, Norris at 10/60 and Rodgers at 20/60
Any other cash distributions are divided on the original progit and loss ratio
b.
1 Cash
Wingler, Capital
Norris, Capital
Rodgers Capital
Guthrie, Capital
Accounts Receivable
2 Cash

$65,600
$4,920
$1,640
$3,280
$6,560
$82,000
$150,000

Wingler, Capital
Norris, Capital
Rodgers Capital
Guthrie, Capital
Land
Building and Equipment

$30,900
$10,300
$20,600
$41,200
$85,000
$168,000

3 Wingler, Capital
Norris, Capital
Rodgers Loan
Rodgers Capital
Cash

$31,800
$568,600
$35,000
$15,200
$140,600

4 no entry required
5 Liabilities
Cash

74000
74000

6 Cash
Wingler, Capital
Norris, Capital
Rodgers Capital
Guthrie, Capital
Inventory

$71,000
$9,000
$3,000
$6,000
$12,000

7 Wingler, Capital
Norris, Capital
Rodgers Capital
Cash

$35,500
$11,833
$23,667

8 Wingler, Capital
Norris, Capital
Rodgers Capital
Guthrie, Capital
Cash

$3,300
$1,100
$2,200
$4,400

$101,000

$71,000

$11,000
Wingler

Beginning balances
loss on accounts receivable
Loss on land, build, and equip
Cash distribution
Loss on inventory
Cash distribution
Liquidation expenses
Subtotal
Gunthrie Insolvent
Current balances

Norris
$120,000
($4,920)
($30,900)
($31,800)
($9,000)
($35,500)
($3,300)
$4,580
($2,080)
$2,500

$88,000
($1,640)
($10,300)
($58,600)
($3,000)
($11,833)
($1,100)
$1,527
($693)
$834

Wingler, Capital
Norris, Capital
Rodgers Capital
Cash

$2,500
$834
$1,666
$5,000

Rodgers

Guthrie
$109,000
($30,000)
$79,000
($50,000)
$29,000
($29,000)
$0

0 and Rodgers at 20/60

and loss ratio

$60,000
($60,000)
$0
$0
$0
$0
$0

Rodgers

Guthrie
$109,000
($3,280)
($20,600)
($50,200)
($6,000)
($23,667)
($2,200)
$3,053
($1,387)
$1,666

$60,000
($6,560)
($41,200)
$0
($12,000)
$0
($4,400)
($4,160)
$4,160
$0