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 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, 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 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 39,000a) 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.

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 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, 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 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 39,000a) 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.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter19: Accounting For Partnerships

Section: Chapter Questions

Problem 1MP

See similar textbooks

Related questions

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, 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
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.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.