Flemng's Plumbing Supples Balance Sheet December 31, 20-1 Assets Llabiltes $ 13,544 Hotes payable Accounts payable Cash $36,000 Accounts Rcehable $15,280 18,082 Lessalowance for bad detts 20נו 13,560 Total lablitles $ 54,062 Merhandise nventory 89,692 Supples omceequpment Lessaccunulated depreciation 1,286 $14,320 1,100 13,20 5 8,800 Owner's tquiky Store equipnent Lessaccunulated depreciation 2,200 6,600 Ian Flening, captal 83 820 Total assets $37,902 Total lablites and owner's equity $B7,902

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Jim Bond, a plumber, has been working for Fleming’s Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a partnership with Fleming. The new partnership will be called Fleming and Bond’s Plumbing Supplies. The terms of the partnership are as follows:

(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 (shown below) 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%.

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, given Penny’s expertise in accounting, she will be given a capital interest of $36,000. 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. Recall from (e) above, the original partnership called for profit sharing, after allocating interest and salaries, of 60% to I. Fleming and 40% to J. Bond.
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
Accum. Depreciation—Office Equipment $18,000
Store Equipment 22,000
Accum. 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.

Flemng's Plumbing Supples
Balance Sheet
December 31, 20-1
Assets
Llabiltes
$ 13,544
Hotes payable
Accounts payable
Cash
$36,000
Accounts Rcehable
$15,280
18,082
Lessalowance for bad detts
20נו
13,560
Total lablitles
$ 54,062
Merhandise nventory
89,692
Supples
omceequpment
Lessaccunulated depreciation
1,286
$14,320
1,100
13,20
5 8,800
Owner's tquiky
Store equipnent
Lessaccunulated depreciation
2,200
6,600
Ian Flening, captal
83 820
Total assets
$37,902
Total lablites and owner's equity
$B7,902
Transcribed Image Text:Flemng's Plumbing Supples Balance Sheet December 31, 20-1 Assets Llabiltes $ 13,544 Hotes payable Accounts payable Cash $36,000 Accounts Rcehable $15,280 18,082 Lessalowance for bad detts 20נו 13,560 Total lablitles $ 54,062 Merhandise nventory 89,692 Supples omceequpment Lessaccunulated depreciation 1,286 $14,320 1,100 13,20 5 8,800 Owner's tquiky Store equipnent Lessaccunulated depreciation 2,200 6,600 Ian Flening, captal 83 820 Total assets $37,902 Total lablites and owner's equity $B7,902
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