Exercise 4 The balance sheet of the Jody, Kane, and Lark partnership on May 1, 2016 (before commencement of partnership liquidation) was as follows: Cash Inventory Loan to Jody Loan to Lark 54,000 60,000 10,000 16,000 110,000 Accounts payable Notes payable Jody, capital (30%) Kane, capital (45%) Lark, capital (25%) 28,000 60,000 32,000 90,000 40,000 Plant assets-net 250,000 Total liab./equity Total assets P P. 250,000 Liquidation events in May were as follows: - The inventory was sold for P6,000 below book value; - Plant assets with a book value of P50,000 were sold for P60,000. Other assumptions: • All non-cash assets left unsold would be considered as a contingent loss of the partnership and should be deducted from the capital accounts of the partners according to their profit or loss sharing ratio. No additional cash contribution from a partner with a deficit balance. A partner's deficit balance will be absorbed by the other partners based on their profit or loss sharing ratio • Partner's right to offset is allowed. Required: 1. Problem 4 - How much is the gain on sale of inventory? 2. Problem 4 - How much is the loss on sale of plant assets? 3. Problem 4 - How much is the contingent loss on non-sale of non-cash assets?
Exercise 4 The balance sheet of the Jody, Kane, and Lark partnership on May 1, 2016 (before commencement of partnership liquidation) was as follows: Cash Inventory Loan to Jody Loan to Lark 54,000 60,000 10,000 16,000 110,000 Accounts payable Notes payable Jody, capital (30%) Kane, capital (45%) Lark, capital (25%) 28,000 60,000 32,000 90,000 40,000 Plant assets-net 250,000 Total liab./equity Total assets P P. 250,000 Liquidation events in May were as follows: - The inventory was sold for P6,000 below book value; - Plant assets with a book value of P50,000 were sold for P60,000. Other assumptions: • All non-cash assets left unsold would be considered as a contingent loss of the partnership and should be deducted from the capital accounts of the partners according to their profit or loss sharing ratio. No additional cash contribution from a partner with a deficit balance. A partner's deficit balance will be absorbed by the other partners based on their profit or loss sharing ratio • Partner's right to offset is allowed. Required: 1. Problem 4 - How much is the gain on sale of inventory? 2. Problem 4 - How much is the loss on sale of plant assets? 3. Problem 4 - How much is the contingent loss on non-sale of non-cash assets?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Question
Transcribed Image Text:Exercise 4
The balance sheet of the Jody, Kane, and Lark partnership on May 1, 2016 (before
commencement of partnership liquidation) was as follows:
Accounts payable
Notes payable
Jody, capital (30%)
Kane, capital (45%)
Lark, capital (25%)
Cash
P
Inventory
Loan to Jody
Loan to Lark
Plant assets-net
54,000
60,000
10,000
16,000
110,000
28,000
60,000
32,000
90,000
40,000
250,000
Total liab./equity
250,000
Total assets
Liquidation events in May were as follows:
- The inventory was sold for P6,000 below book value;
- Plant assets with a book value of P50,000 were sold for P60,000.
Other assumptions:
All non-cash assets left unsold would be considered as a contingent loss of the
partnership and should be deducted from the capital accounts of the partners
according to their profit or loss sharing ratio.
No additional cash contribution from a partner with a deficit balance. A partner's deficit
balance will be absorbed by the other partners based on their profit or loss sharing
ratio
• Partner's right to offset is allowed.
Required:
1. Problem 4 - How much is the gain on sale of inventory?
2. Problem 4 - How much is the loss on sale of plant assets?
3. Problem 4 - How much is the contingent loss on non-sale of non-cash assets?
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