arinerships—Formation, Operations, and Changes in Ownership Interests _ 555 REQUIRED: Prepare a statement of partnership capital forthe year ended December 31, 2011 P 16-2 Recording new partner investment—Revaluation and nonrevaluation cases ‘The partnership of Mortin and Oscar is being dissolved, and the assets and equities at book value and fair value and the profit and loss sharing ratios at January 1, 2011, are as follows: Book Value Fair Value Cash $20,000 $ 20,000 ‘Accounts receivablo—net 100.000 Inventories Plant asets—net Accounts payable ‘Mortin capital (50%) Oscar capital (50%) Mortin and Oscar agree to admit Trent into the partnership for a one-third interest. Trent invests {$95,000 cash and a building to be used in the business with a book value to Trent of $100,000 and a fair value of $120,000. REQUIRED 1, Prepare a balance sheet for the Mortin, Oscar, and Treat partnership on January 2, 2011, just after the admission of Trent, assuming thatthe assets arc revalued and goodwill is recognized, 2, Prepate a balance sheet for the Mortin, Oscar, and Trent partnership on January 2, 2011, after the admis- sion of Treat, assuming tat the assets are not revalued, Ashe and Barbour are partners with capital balances on January 1, 2011, of $40,000 and $50,000, respectively. The partnership agreement provides that each partner is allowed 10 percent interest ‘on beginning capital balances; that Ashe receives a salary allowance of $12,000 per year and a 20 percent bonus of partnership income after interest, salary allowance, and bonus; and that remain- ing income is divided equally, REQUIRED: Prepaze an income dstibution schedule to show how the $105,000 partnership neti for 2011 shouldbe divided, P 16-4 artnership income allocation—Complex, net loss ‘The partnership agreement of Alex, Catl, and Erika provides that profits arc to be divided as follows: 1. Alex is to receive a salary allowance of $10,000 for managing the partnership business. 2, Partners ate to receive 10% intexest on average capital balances. Drawings are excluded from ‘computing these averages. 3, Remaining profits are to be divided 30%, 30%, and 40% to Alex, Carl, and Erika, respectively ‘Alex had a capital balance of $60,000 at January 1, 2011, and had drawings of $8,000 on July 1, 2011. Car's eapital balance on January 1, 2011, was $90,000, and he invested an additional {$30,000 on September 1, 2011. Erika’s beginning capital balance was $110,000, and she withdrew {$10,000 on July 1 but invested an additional $20,000 on October 1, 2011 ‘The partnership has a net loss of $12,000 during 2011, and the accountant in charge allocated the net loss as follows: $200 profit to Alex, $4,800 loss to Carl, and $7,400 loss to Erika.556 CHAPTER 16 REQUIRED 1. A schedule to show the correct allocation ofthe partesship net los for 2011 2. A statement of partnership capital forthe year ended December 31, 2011 ‘8. Journal entries to correct the books of the partnership at December 31, 2011, assuming that all closing nities for the year have been recorded, P1655 Partnership income allocation—Profit sharing based on beginning, ending, and average capital balances [A summary of changes inthe pital accounts ofthe Katie, Lynda, and Molly partnership for 2011, before closing partnership net income tothe capital accounts isa follows Katie Lynda Molly Total Capital Capital Capital Capital ‘380,000 $90,000 $250,000 Balance January 1,201 Investment April 1 120,000 Withdrawal May 1 15,000) 15,000) Withdrawal July 1 40,000) ‘Withdeaval September 1 (30,000) wo $215,000, REQUIRED: Determine the allocation ofthe 2011 net income to the partners under each of the following ses of independent assumptions: 1. Partnership net income is $60,000, and profit is divided on the basis of average capital balances during the yea 2, Partnership net income is $50,000, Katie gets 2 bonus of 10% of income for managing the busines, and the remaining profits are divided onthe bass of heginning capital balances. 13, Parinership net Tost is $35,000, Molly receives a $12,000 salary, each partner is allowed 10% interest on beginning capital balances, and the remaining profits are divided equaly P 16-6 Partner income allocation—Correction of error ‘The partnership of Jones, Keller, and Glade was created on January 2, 2011, with each of the part- ners contributing cash of $30,000, Reported profits, withdrawals, and additional investments were as follows Reported Net Income Withdrawals __ Additional Investments 2011 19,000 $4,000 Keller $5,000 Glade 5,000 Tones 2012 22,000 8,000 Glade 5,000 Jones 3,000 Keller 2013 29,000 2,000 Glade 6,000 Glade 4.000 Keller ‘The partnership agreement provides that partnets are to be allowed 10 percent interest on the beginning-of-the-year capital balances, that Jones is to receive a $7,000 salary allowance, and that remaining profits are to be divided equally. After the books were closed on December 31, 2013, it was discovered that depreciation had been understated by $2,000 each year and that the inventory taken at December 31, 2013, was understated by $8,000,