Chapter 12

Accounting for Partnerships

PROBLEMS: SET B
Prepare entries for formation
of a partnership and a
balance sheet.

P12-1B The post-closing trial balances of two proprietorships on January 1, 2014, are
presented below.
Utech Company

(LO 2, 4), AP

Dr.
Cash
Accounts receivable
Allowance for doubtful accounts
Inventory
Equipment
Accumulated depreciationequipment
Notes payable
Accounts payable
Utech, capital
Flott, capital

Flott Company

Cr.

Dr.

$ 10,000
18,000

Cr.

$ 8,000
30,000
$

2,000

$ 3,000

35,000
60,000

20,000
35,000
28,000
20,000
30,000
43,000

15,000
40,000
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

$18,000
2,500
38,000
35,000

$30,000
4,000
25,000
18,000

Accounts receivable
Allowance for doubtful accounts
Inventory
Equipment

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 additional $3,500 in cash, and Flott will invest an additional $16,000 in cash.
(a) Utech, Capital $48,500
Flott, Capital $37,000
(c) Total assets $195,000
Journalize divisions of net
income and prepare a
partners capital statement.

(LO 3, 4), AP

Instructions
(a) Prepare separate journal entries to record the transfer of each proprietorships assets
and liabilities to the partnership.
(b) Journalize the additional cash investment by each partner.
(c) Prepare a classified balance sheet for the partnership on January 1, 2014.
P12-2B At the end of its first year of operations on December 31, 2014, RKC Companys
accounts show the following.
Partner

Drawings

Capital

Riles
Kinder
Crifui

$15,000
10,000
5,000

$40,000
25,000
15,000

The capital balance represents each partners initial capital investment. Therefore, net
income or net loss for 2014 has not been closed to the partners capital accounts.

(a) (1) Riles $25,000

(2) Riles $21,000
(3) Riles $26,000

P-40

Instructions
(a) Journalize the entry to record the division of net income for 2014 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.
(3) Net income is $34,000. Each partner is allowed interest of 10% on beginning capital
balances. Riles is given a $20,000 salary allowance. The remainder is shared equally.

Problems: Set B
(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
sheet shows the following.

P-41

(c) Riles $51,000

Prepare entries and schedule
of cash payments in liquidation of a partnership

(LO 5), AP
NEWMAN COMPANY
Balance Sheet
April 30, 2014
Assets

Liabilities and Owners Equity

Cash
Accounts receivable
Allowance for doubtful accounts
Inventory
Equipment
Accumulated depreciationequipment

$ 30,000
25,000
(2,000)
35,000
20,000
(8,000)

Notes payable
Accounts payable
Salaries and wages payable
Mallory, capital
Bosco, capital
Renteria, capital

$100,000

$ 20,000
30,000
2,500
28,000
13,650
5,850
$100,000

The partners share income and loss 5:3:2. During the process of liquidation, the transactions below were completed in the following sequence.
1.
2.
3.
4.

A total of $55,000 was received from converting noncash assets into cash.
Gain or loss on realization was allocated to partners.
Liabilities were paid in full.
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.

(a) Loss on realization $15,000

Cash paid: to Mallory
$20,500; to Renteria $2,850

*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 Gigers ownership interest by paying Giger $4,000 in
cash.
(2) Edelman purchases 50% of Beyers 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) Beyers capital balance is $25,000 after admitting Edelman to the partnership
by investment. If Beyers ownership interest is 25% of total partnership capital,
what were (1) Edelmans 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.
Partner

Capital Balance

Income Ratio

Dunlap
Yevak
Piper

$100,000
51,000
28,000

60%
30
10

Journalize admission of a
partner under different
assumptions.

(LO 6), AP

(a) (1) Edelman, Capital $5,000

(2) Edelman $8,000
(3) Edelman $34,000
(4) Edelman $16,000

Journalize withdrawal of a
partner under different
assumptions.

(LO 7), AP

P-42

12 Accounting for Partnerships

(a) (1) Yevak, Capital $14,000

(2) Yevak, Capital $28,000
(3) Bonus $6,000
(4) Bonus $9,000

Instructions
(a) Journalize the withdrawal of Piper under each of the following independent
assumptions.
(1) Each of the remaining partners agrees to pay $15,000 in cash from personal funds
to purchase Pipers ownership equity. Each receives 50% of Pipers equity.
(2) Yevak agrees to purchase Pipers ownership interest for $22,000 in cash.
(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 Yevaks capital balance after Pipers withdrawal is $57,000, what were (1) the total
bonus to the remaining partners and (2) the cash paid by the partnership to Piper?