(a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable. (b) Bond will invest $50,000 cash. (c) Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000. (d) Each partner will receive 10% interest on the January 1 balance of his capital account. (e) Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%. Fleming’s Plumbing Supplies Balance Sheet December 31, 20-1 1 Assets Liabilities 2 Cash $13,544.00 Notes payable $36,000.00 3 Accounts receivable $15,280.00 Accounts payable 18,082.00 4 Less allowance for bad debts 1,720.00 13,560.00 Total liabilities $54,082.00 5 Merchandise inventory 89,692.00 6 Supplies 1,286.00 7 Office equipment $14,320.00 8 Less accumulated depreciation 1,100.00 13,220.00 9 Store equipment $8,800.00 Owner’s Equity 10 Less accumulated depreciation 2,200.00 6,600.00 Ivan Fleming, capital 83,820.00 11 Total assets $137,902.00 Total liabilities and owner’s equity $137,902.00 Required: 1. Prepare the entries on January 1, 20-2, for the formation of the partnership. 2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner. 3. In December 20-4, Fleming’s daughter, Penny, graduated from business college and asked to join the business as a partner. She has $30,000 to invest and it is agreed that Penny will be given a capital interest of $30,000. Profits and losses will be shared as follows: I. Fleming, 50%; J. Bond, 30%; P. Fleming, 20%. Prepare the entry for Penny’s investment on January 1, 20-5. 4. After several years of operations, it is decided to liquidate the partnership. After making closing entries on July 31, 20-9, the following accounts remain open: Cash $ 20,000 Inventory 150,000 Office Equipment 30,000 Accumulated Depreciation—Office Equipment $18,000 Store Equipment 22,000 Accumulated Depreciation—Store Equipment 15,000 Notes Payable 20,000 Ivan Fleming, Capital 80,000 Jim Bond, Capital 50,000 Penny Fleming, Capital 39,000 (a) On August 1, 20-9, the inventory is sold for $130,000. (b) On August 3, the office equipment is sold for $10,000. (c) On August 5, the store equipment is sold for $12,000. (d) On August 10, the notes payable are paid. (e) On August 15, the remaining cash is distributed to the partners according to the balances in their capital accounts. Prepare a statement of partnership liquidation and related journal entries for the period August 1–15, 20-9. General Journal 1. Prepare the entries on January 1, 20-2, for the formation of the partnership. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 3. Prepare the entry for Penny’s investment on January 1, 20-5. PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 4. Record the journal entries related to the partnership liquidation for the period August 1–15, 20-9. PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Income Statement 2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner. Additional Instructions Fleming and Bond’s Plumbing Supplies Income Statement (Partial) For Year Ended December 31, 20-2 1 2 Allocation of net income: I. Fleming J. Bond Total 3 4 5 6 Allocation of net income Statement of Partnership Liquidation 4. Prepare a statement of partnership liquidation for the period August 1–15, 20--, showing the following: (a) Sale of inventory and allocation of loss on August 1. (b) Sale of office equipment and allocation of loss on August 3. (c) Sale of store equipment and allocation of gain on August 5. (d) The payment of the liabilities on August 10. (e) The distribution of cash to the partners on August 15. Additional Instructions Fleming and Bond’s Plumbing Supplies Statement of Partnership Liquidation For Period August 1–15, 20-9 1 Cash Merchandise Inventory Office Equipment Accumulated Depreciation—Office Equipment Store Equipment Accumulated Depreciation—Store Equipment Notes Payable I. Fleming, Capital J. Bond, Capital P. Fleming, Capital 2 3 4 5 6 7 8 9 10 11 12

(a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable. (b) Bond will invest $50,000 cash. (c) Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000. (d) Each partner will receive 10% interest on the January 1 balance of his capital account. (e) Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%. Fleming’s Plumbing Supplies Balance Sheet December 31, 20-1 1 Assets Liabilities 2 Cash $13,544.00 Notes payable $36,000.00 3 Accounts receivable $15,280.00 Accounts payable 18,082.00 4 Less allowance for bad debts 1,720.00 13,560.00 Total liabilities $54,082.00 5 Merchandise inventory 89,692.00 6 Supplies 1,286.00 7 Office equipment $14,320.00 8 Less accumulated depreciation 1,100.00 13,220.00 9 Store equipment $8,800.00 Owner’s Equity 10 Less accumulated depreciation 2,200.00 6,600.00 Ivan Fleming, capital 83,820.00 11 Total assets $137,902.00 Total liabilities and owner’s equity $137,902.00 Required: 1. Prepare the entries on January 1, 20-2, for the formation of the partnership. 2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner. 3. In December 20-4, Fleming’s daughter, Penny, graduated from business college and asked to join the business as a partner. She has $30,000 to invest and it is agreed that Penny will be given a capital interest of $30,000. Profits and losses will be shared as follows: I. Fleming, 50%; J. Bond, 30%; P. Fleming, 20%. Prepare the entry for Penny’s investment on January 1, 20-5. 4. After several years of operations, it is decided to liquidate the partnership. After making closing entries on July 31, 20-9, the following accounts remain open: Cash $ 20,000 Inventory 150,000 Office Equipment 30,000 Accumulated Depreciation—Office Equipment $18,000 Store Equipment 22,000 Accumulated Depreciation—Store Equipment 15,000 Notes Payable 20,000 Ivan Fleming, Capital 80,000 Jim Bond, Capital 50,000 Penny Fleming, Capital 39,000 (a) On August 1, 20-9, the inventory is sold for $130,000. (b) On August 3, the office equipment is sold for $10,000. (c) On August 5, the store equipment is sold for $12,000. (d) On August 10, the notes payable are paid. (e) On August 15, the remaining cash is distributed to the partners according to the balances in their capital accounts. Prepare a statement of partnership liquidation and related journal entries for the period August 1–15, 20-9. General Journal 1. Prepare the entries on January 1, 20-2, for the formation of the partnership. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 3. Prepare the entry for Penny’s investment on January 1, 20-5. PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 4. Record the journal entries related to the partnership liquidation for the period August 1–15, 20-9. PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Income Statement 2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner. Additional Instructions Fleming and Bond’s Plumbing Supplies Income Statement (Partial) For Year Ended December 31, 20-2 1 2 Allocation of net income: I. Fleming J. Bond Total 3 4 5 6 Allocation of net income Statement of Partnership Liquidation 4. Prepare a statement of partnership liquidation for the period August 1–15, 20--, showing the following: (a) Sale of inventory and allocation of loss on August 1. (b) Sale of office equipment and allocation of loss on August 3. (c) Sale of store equipment and allocation of gain on August 5. (d) The payment of the liabilities on August 10. (e) The distribution of cash to the partners on August 15. Additional Instructions Fleming and Bond’s Plumbing Supplies Statement of Partnership Liquidation For Period August 1–15, 20-9 1 Cash Merchandise Inventory Office Equipment Accumulated Depreciation—Office Equipment Store Equipment Accumulated Depreciation—Store Equipment Notes Payable I. Fleming, Capital J. Bond, Capital P. Fleming, Capital 2 3 4 5 6 7 8 9 10 11 12

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

(a)	Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable.
(b)	Bond will invest $50,000 cash.
(c)	Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000.
(d)	Each partner will receive 10% interest on the January 1 balance of his capital account.
(e)	Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%.

Fleming’s Plumbing Supplies

Balance Sheet

December 31, 20-1

1	Assets			Liabilities
2	Cash		$13,544.00	Notes payable	$36,000.00
3	Accounts receivable	$15,280.00		Accounts payable	18,082.00
4	Less allowance for bad debts	1,720.00	13,560.00	Total liabilities		$54,082.00
5	Merchandise inventory		89,692.00
6	Supplies		1,286.00
7	Office equipment	$14,320.00
8	Less accumulated depreciation	1,100.00	13,220.00
9	Store equipment	$8,800.00		Owner’s Equity
10	Less accumulated depreciation	2,200.00	6,600.00	Ivan Fleming, capital		83,820.00
11	Total assets		$137,902.00	Total liabilities and owner’s equity		$137,902.00

Required:

1.	Prepare the entries on January 1, 20-2, for the formation of the partnership.
2.	Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner.
3.	In December 20-4, Fleming’s daughter, Penny, graduated from business college and asked to join the business as a partner. She has $30,000 to invest and it is agreed that Penny will be given a capital interest of $30,000. Profits and losses will be shared as follows: I. Fleming, 50%; J. Bond, 30%; P. Fleming, 20%. Prepare the entry for Penny’s investment on January 1, 20-5.
4.	After several years of operations, it is decided to liquidate the partnership. After making closing entries on July 31, 20-9, the following accounts remain open:

Cash	$ 20,000
Inventory	150,000
Office Equipment	30,000
Accumulated Depreciation—Office Equipment		$18,000
Store Equipment	22,000
Accumulated Depreciation—Store Equipment		15,000
Notes Payable		20,000
Ivan Fleming, Capital		80,000
Jim Bond, Capital		50,000
Penny Fleming, Capital		39,000

(a)	On August 1, 20-9, the inventory is sold for $130,000.
(b)	On August 3, the office equipment is sold for $10,000.
(c)	On August 5, the store equipment is sold for $12,000.
(d)	On August 10, the notes payable are paid.
(e)	On August 15, the remaining cash is distributed to the partners according to the balances in their capital accounts.

Prepare a statement of partnership liquidation and related journal entries for the period August 1–15, 20-9.

General Journal

1. Prepare the entries on January 1, 20-2, for the formation of the partnership.

General Journal Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
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5
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8
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3. Prepare the entry for Penny’s investment on January 1, 20-5.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2

4. Record the journal entries related to the partnership liquidation for the period August 1–15, 20-9.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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Income Statement

2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner.

Additional Instructions

Fleming and Bond’s Plumbing Supplies

Income Statement (Partial)

For Year Ended December 31, 20-2

1
2	Allocation of net income:	I. Fleming	J. Bond	Total
3
4
5
6	Allocation of net income

Statement of Partnership Liquidation

4.	Prepare a statement of partnership liquidation for the period August 1–15, 20--, showing the following:
(a)	Sale of inventory and allocation of loss on August 1.
(b)	Sale of office equipment and allocation of loss on August 3.
(c)	Sale of store equipment and allocation of gain on August 5.
(d)	The payment of the liabilities on August 10.
(e)	The distribution of cash to the partners on August 15.

Additional Instructions

Fleming and Bond’s Plumbing Supplies

Statement of Partnership Liquidation

For Period August 1–15, 20-9

1	Cash	Merchandise Inventory	Office Equipment	Accumulated Depreciation—Office Equipment	Store Equipment	Accumulated Depreciation—Store Equipment	Notes Payable	I. Fleming, Capital	J. Bond, Capital	P. Fleming, Capital
2
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