On August 3, the firm of Chapelle, Rock, and Pryor decided to liquidate its partnership. The partners have capital balances of $14,000, $102,000, and $86,000, respectively. The cash balance is $65,000, the book values of noncash assets total $167,000, and liabilities total $30,000. The partners share income and losses in the ratio of 1:2:2. Instructions 1. Prepare a statement of partnership liquidation, covering the period August 3–29, for each of the following independent assumptions: a. All of the noncash assets are sold for $217,000 in cash, the creditors are paid, and the remaining cash is distributed to the partners. b. All of the noncash assets are sold for $72,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners. 2. Assume that the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) Allocate the partner’s deficiency and (b) Distribute the remaining cash.
> Work Place Products Inc., a wholesaler of office products, was organized on July 1 of the current year, with an authorization of 50,000 shares of preferred 2% stock, $40 par, and 750,000 shares of $7 par common stock. The following selected transactions
> Iacouva Company reported the following on the company’s income statement for two recent years: a. Determine the times interest earned ratio for the current year and the prior year. Round to one decimal place. b. What conclusions can y
> Loomis, Inc. reported the following on the company’s income statement in two recent years: a. Determine the times interest earned ratio for the current year and the prior year. Round to one decimal place. b. Is this ratio improving or
> The following data were taken from recent annual reports of Southwest Airlines, which operates a low-fare airline service to more than 50 cities in the United States: a. Determine the times interest earned ratio for the current and preceding years. Rou
> At the beginning of the current year, two bond issues (Simmons Industries 7%, 20-year bonds and Hunter Corporation 8%, 10-year bonds) were outstanding. During the year, the Simmons Industries bonds were redeemed and a significant loss on the redemption o
> On January 1, Year 1, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31, Year 1. a. Prepare an amortization table for this installment note, simil
> On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following: Year 1 Jan. 1. Issued the
> On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven-year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first
> Fleeson Company needs additional funds to purchase equipment for a new production facility and is considering either issuing bonds payable or borrowing the money from a local bank in the form of an installment note. How does an installment note differ fr
> If you asked your broker to buy you a 12% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? Explain.
> In teams, select a public company that interests you. Obtain the company’s most recent annual report on Form 10-K. The Form 10-K is a company’s annually required filing with the Securities and Exchange Commission (SEC). It includes the company’s financia
> Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 40,000 shares of cumulative preferred 2% stock, $75 par, and 100,000 shares of $50 par common. During its first four years of operations, the following amounts were distr
> Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Lou and Shirley tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the gen
> Tommy Gunn is a division manager for K-Cern Inc., a small pharmaceutical company. Tommy’s division has been working on a new drug that has the potential to revolutionize the treatment of skin cancer. Once the drug is proven to be effective in clinical tr
> Epstein Engineering Inc. began operations on January 5, 20Y8, with the issuance of 500,000 shares of $80 par common stock. The sole stockholders of Epstein Engineering Inc. are Barb Abrams and Dr. Amber Epstein, who organized Epstein Engineering Inc. wit
> Bernie Ebbers, the CEO of WorldCom, a major telecommunications company, was having personal financial troubles. Ebbers pledged a large stake of his WorldCom stock as security for some personal loans. As the price of WorldCom stock sank, Ebbers’s bankers
> Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant
> Pulsar Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Pulsar Optics on April 30 of the current year as follows: Preferred 1% Stock, $120 par (300,000 shares authorized, 36,000 shares issued) .
> Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: Year
> West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by West Yellowstone Outfitters during the current fiscal year are as follows: Jan. 15. Split the common stock 4 for 1 and reduced the p
> Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 20Y3, are as follows: Common Stock, $5 stated value (900,000 shares authorized, 620,000 shares i
> Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31: Year 1 Apr. 1. Purchas
> O’Brien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December 31, Year 2 and Year 1 follow. Selected missing balances are shown by letters. Note 1. Investments are classified as available for sa
> Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication Corporation at the beginning of the current fiscal year: Prefer
> Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31: Year 1 Feb. 1. Purchased
> Caterpillar Inc. and Deere & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:
> Pacific Gas and Electric Company is a large gas and electric utility operating in northern and central California. Three recent years of financial data for Pacific Gas and Electric Company are as follows: a. Determine the earnings per share for fiscal
> The stockholders’ equity T accounts of I-Cards Inc. for the fiscal year ended December 31, 20Y9, are as follows. Prepare a statement of stockholders’ equity for the year ended December 31, 20Y9. COMMON STOCK Jan.
> List the errors in the following Stockholders’ Equity section of the balance sheet prepared as of the end of the current year: Stockholders'Equity Paid-in capital: Preferred 2% stock, $80 par (125,000 shares authorized and Issued)
> Sumter Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 20Y2: Retained earnings, February 1, 20Y1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,650,000 Ne
> Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing Inc. on July 31, the end of the current year: Common Stock, $36 par . . . . . . .
> The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year: Common Stock, $45 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,060,000
> A company reports the following: Net income ……………………………………………………….. $410,000 Preferred dividends …………………………………………….. $60,000 Shares of common stock outstanding ……………………… 50,000 Market price per share of common stock ……………………… $84 a. Determine the compan
> The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder, at October 31, the end of the current fiscal year: Common Stock, no par, $14 stated value . . . . . . . . . . . . . .
> A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year’s vacation pay is $54,000. a. Journalize the adjusting entry required on January 31, the end of t
> Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water Inc. sold 14,000 of the reacquired shar
> Lawn Spray Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On January 31 of the current year, Lawn Spray Inc. reacquired 50,000 shares of its common stock at $51 per share. On June 14, 24,000 of the reacquired shar
> Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year, Lava Lake reacquired 180,000 shares of its common stock at $17 per share. On April 30, Lava Lake Inc. sold 90,000 of the reacquired shares at $20 per share. On Augus
> Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows: Jan. 8. Split the common stock 2 for 1 and reduced the par from $80 to $40 per share. After the split, there were 150,000 common shares out
> Indicate whether the following actions would (+) increase, (–) decrease, or (0) not affect Indigo Inc.’s total assets, liabilities, and stockholders’ equity: Stockholders' Assets Llablitles Equit
> Senior Life Co. is an HMO for businesses in the Portland area. The following account balances appear on the balance sheet of Senior Life Co.: Common stock (800,000 shares authorized; 500,000 shares issued), $4 par, $2,000,000; Paid-in capital in excess o
> Taye Barrow, M.D., and James Robbins, M.D., are sole owners of two medical practices that operate in the same medical building. The two doctors agree to combine assets and liabilities of the two businesses to form a partnership. The partnership agreement
> Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while Hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which a
> Lindsey Wilson has agreed to invest $200,000 into an LLC with Lacy Lovett and Justin Lassiter. Lovett and Lassiter will not invest any money but will provide effort and expertise to the LLC. Lovett and Lassiter have agreed that the net income of the LLC
> A company reports the following: Net income ……………………………………………………. $185,000 Preferred dividends …………………………………………. $25,000 Shares of common stock outstanding ………………… 100,000 Market price per share of common stock ………………….. $20 a. Determine the company’s e
> Dave’s Scooters is a small manufacturer of specialty scooters. The company employs 14 production workers and four administrative persons. The following procedures are used to process the company’s weekly payroll: a. Whenever an employee receives a pay ra
> In groups of two or three, find the most recent “Accounting Today Top 100 Firms” on the Internet. a. From this document, create an Excel spreadsheet of the total revenues and total partners for Deloitte & Touche, PwC, Ernst & Young, and KPMG. b. Determin
> Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time. The follow
> On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contribu
> After the accounts are closed on April 10, prior to liquidating the partnership, the capital accounts of Zach Fairchild, Austin Lowes, and Amber Howard are $42,000, $7,500, and $36,500, respectively. Cash and noncash assets total $23,500 and $84,500, res
> Brian Caldwell and Adriana Estrada have operated a successful firm for many years, sharing net income and net losses equally. Kris Mays is to be admitted to the partnership on September 1 of the current year, in accordance with the following agreement: a
> The ledger of Camila Ramirez and Ping Xue, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y2: The balance in Xue’s capital account includes an additional investmen
> Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $150,000 and that Greene is to invest $50,000. Morrison is to devote one-half time to the business, and Greene is to devote full time. The following plans
> On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $23,400 in cash and merchandise inventory valued at $62,600. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and
> On November 1, the firm of Sails, Welch, and Greenberg decided to liquidate its partnership. The partners have capital balances of $58,000, $72,000, and $10,000, respectively. The cash balance is $32,000, the book values of noncash assets total $128,000,
> Big Howie’s Hot Dog Stand is a fast-food restaurant specializing in hot dogs and hamburgers. The store employs 8 full-time and 12 part-time workers. The store’s weekly payroll averages $5,600 for all 20 workers. Big Howie’s Hot Dog Stand uses a personal
> In the following summary of data for a payroll period, some amounts have been intentionally omitted: Earnings: 1. At regular rate ……………………………….. ? 2. At overtime rate …………………. $ 80,000 3. Total earnings ……………………………….…? Deductions: 4. Social security tax
> After the accounts are closed on February 3, prior to liquidating the partnership, the capital accounts of William Gerloff, Joshua Chu, and Courtney Jewett are $19,300, $4,500, and $22,300, respectively. Cash and noncash assets total $5,200 and $55,900,
> Musa Moshref and Shaniqua Hollins have operated a successful firm for many years, sharing net income and net losses equally. Taylor Anderson is to be admitted to the partnership on July 1 of the current year, in accordance with the following agreement: a
> The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y3: The balance in Yost’s capital account includes an additional investm
> Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 20Y2, the three members had equity of $200,000, $40,000, and $160,000, respectively. WLKT Partners contributed an additional $50,000 to Marve
> Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $40,000 and $30,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of
> Sixty-year-old Wanda Davis retired from her computer consulting business in Boston and moved to Florida. There she met 27-year-old Ava Jain, who had just graduated from Eldon Community College with an associate degree in computer science. Wanda and Ava f
> Leigh Meadows and Byron Leef formed a partnership in which the partnership agreement provided for salary allowances of $35,000 and $25,000, respectively. Determine the division of a $20,000 net loss for the current year, assuming that remaining income or
> Using each of the five assumptions as to income division listed in Exercise 12-3, determine the income participation of Hawes and Albright if the year’s net income is $104,000. In Exercise 12-3 Tyler Hawes and Piper Albright formed a partnership, invest
> Tyler Hawes and Piper Albright formed a partnership, investing $210,000 and $70,000, respectively. Determine their participation in the year’s net income of $290,000 under each of the following independent assumptions: (a) No agreement concerning divisio
> Urban Window Company had gross wages of $320,000 during the week ended July 15. The amount of wages subject to social security tax was $320,000, while the amount of wages subject to federal and state unemployment taxes was $40,000. Tax rates are as follo
> Hannah Freeman and Hugo Hernandez form a partnership by combining assets of their former businesses. The following balance sheet information is provided by Freeman, sole proprietorship: Freeman obtained appraised values for the land and equipment as fo
> A company reports the following: Net income …………………………………………………… $1,000,000 Preferred dividends …………………………………………….. 50,000 Average stockholders’ equity ……………………………. 6,250,000 Average common stockholders’ equity ………………. 3,800,000 Determine (a) The return
> Kimberly Payne and Arionna Maples decide to form a partnership by combining the assets of their separate businesses. Payne contributes the following assets to the partnership: cash, $20,000; accounts receivable with a face amount of $145,000 and an allow
> Superior Cleaning Services, LLC, provides cleaning services for office buildings. The firm has 10 members in the LLC, which did not change between 20Y8 and 20Y9. During 20Y9, the business terminated two commercial contracts. The following revenue and emp
> The accounting firm of Deloitte & Touche is the largest international accounting firm in the world as ranked by total revenues. For two recent years, Deloitte & Touche reported the following for its U.S. operations: a. For the current and previ
> The capital accounts of Angel Alvarez and Emma Allison have balances of $47,000 and $73,000, respectively, on January 1, 20Y4, the beginning of the fiscal year. On March 10, Alvarez invested an additional $8,000. During the year, Alvarez and Allison with
> Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members’ equity prior to liquidation and asset realization on
> After closing the accounts on July 1, prior to liquidating the partnership, the capital account balances of Gold, Porter, and Sims are $55,000, $45,000, and $20,000, respectively. Cash, noncash assets, and liabilities total $56,000, $96,000, and $32,000,
> Nettles, King, and Tanaka are partners sharing income 3:2:1. After the firm’s loss from liquidation is distributed, the capital account balances were as follows: Nettles, $15,000 Dr.; King, $46,000 Cr.; and Tanaka, $71,000 Cr. If Nettles is personally ba
> Bray, Lincoln, and Mapes arranged to import and sell orchid corsages for a university dance. They agreed to share equally the net income or net loss of the venture. Bray and Lincoln advanced $225 and $300 of their own respective funds to pay for advertis
> The payroll register for Gamble Company for the week ended April 29 indicated the following: Salaries ……………………………………………..$1,250,000 Social security tax withheld ……………………… 75,000 Medicare tax withheld ……………………………… 18,750 Federal income tax withheld ………………
> Lewis, Zapata, and Fowler share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays the liabilities, the balances in the capital accounts are as follows: Lewis, $73,500 Cr.; Z
> David Oliver and Umar Ansari, with capital balances of $28,000 and $35,000, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $67,000 of cash remaining. If the partners share income
> A company reports the following: Net income ………………………………………………… $ 375,000 Preferred dividends ………………………………………… 75,000 Average stockholders’ equity ………………………. 2,500,000 Average common stockholders’ equity …………. 1,875,000 Determine (a) The return on stock
> Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $28,000 and $18,000, respectively. After all noncash assets are sold and all liabilities are pai
> The statement of members’ equity for Bonanza, LLC, follows: a. What was the income-sharing ratio in 20Y3? b. What was the income-sharing ratio in 20Y4? c. How much cash did Thomas Dunn contribute to Bonanza, LLC, for his interest? d.
> Lane Stevens is to retire from the partnership of Stevens and Associates as of March 31, the end of the current fiscal year. After closing the accounts, the capital balances of the partners are as follows: Lane Stevens, $150,000; Cherrie Ford, $70,000; a
> The partnership of Angel Investor Associates began operations on January 1, 20Y5, with contributions from two partners as follows: Dennis Overton ……………………………….. $180,000 Ben Testerman ………………………………….. 120,000 The following additional partner transactions
> L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and Lipscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each p
> Alert Medical, LLC, consists of two doctors, Abrams and Lipscomb, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Lin has been asked to join the LLC. Prior to admitting Lin, the assets of Alert Medical were revalued to ref
> Cody Jenkins and Lacey Tanner formed a partnership to provide landscaping services. Jenkins and Tanner shared profits and losses equally. After all the tangible assets have been adjusted to current market prices, the capital accounts of Cody Jenkins and
> Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,000,000 shares of common stock with a par of $1. The following transactions affecting stockholders’ equity were c
> After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $30,000 cash t
> The capital accounts of Trent Henry and Tim Chou have balances of $160,000 and $100,000, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $35,000 and one-fourth of Chou’s
> Myles Etter and Crystal Santori are partners who share in the income equally and have capital balances of $210,000 and $62,500, respectively. Etter, with the consent of Santori, sells one-third of his interest to Lonnie Davis. What entry is required by t
> Breakin Away Company has three employees—a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee: For the current pay period, the computer programmer worked 50 hours
> Emilio Alvarez and Graciela Zavala joined together to form a partnership. Is it possible for them to lose a greater amount than the amount of their investment in the partnership? Explain.
> What are the main advantages of (a) Proprietorships, (b) Partnerships, and (c) Limited liability companies?
> Why is it important to state all partnership assets in terms of current prices at the time of the admission of a new partner?
> Explain the difference between the admission of a new partner to a partnership (a) By purchase of an interest from another partner and (b) By contribution of assets to the partnership.
> a. What accounts are debited and credited to record a partner’s cash withdrawal in lieu of salary? b. The articles of partnership provide for a salary allowance of $6,000 per month to partner C. If C withdrew only $4,000 per month, would this affect the
> Josiah Barlow, Patty DuMont, and Owen Maholic are contemplating the formation of a partnership. According to the partnership agreement, Barlow is to invest $60,000 and devote one-half time, DuMont is to invest $40,000 and devote three-fourths time, and M
> On April 5, Fenning Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 30,000 shares of $80 par common stock valued at $112 per share. Journalize the entry to record the transaction.
