Solution manual accounting principles 9e by kieso kimmel chapter 12

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 12 Accounting for Partnerships ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Do It! Exercises 1 A Problems B Problems Identify the characteristics of the partnership form of business organization 1, 2, 3, 4, 24 Explain the accounting entries for the formation of a partnership 1, 2, 1A 1B Identify the bases for dividing net income or net loss 6, 7, 8, 9, 10 3, 4, 5 4, 2A 2B Describe the form and content of partnership financial statements 11 6, 1A, 2A 1B, 2B Explain the effects of the entries to record the liquidation of a partnership 12, 13, 14, 15, 16 8, 9, 10 3A 3B *6 Explain the effects of the entries when a new partner is admitted 17, 18, 19, 20 7, 11, 12, 15 4A 4B *7 Describe the effects of the entries when a partner withdraws from the firm 21, 22, 23 9, 10 13, 14, 15 5A 5B *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix*to the chapter Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 12-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) Simple 20–30 1A Prepare entries for formation of a partnership and a balance sheet 2A Journalize divisions of net income and prepare a partners’ capital statement Moderate 30–40 3A Prepare entries with a capital deficiency in liquidation of a partnership Moderate 30–40 *4A Journalize admission of a partner under different assumptions Moderate 30–40 *5A Journalize withdrawal of a partner under different assumptions Moderate 30–40 Simple 30–40 1B Prepare entries for formation of a partnership and a balance sheet 2B Journalize divisions of net income and prepare a partners’ capital statement Moderate 30–40 3B Prepare entries and schedule of cash payments in liquidation of a partnership Moderate 30–40 *4B Journalize admission of a partner under different assumptions Moderate 30–40 *5B Journalize withdrawal of a partner under different assumptions Moderate 30–40 12-2 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com WEYGANDT ACCOUNTING PRINCIPLES 9E CHAPTER 12 ACCOUNTING FOR PARTNERSHIPS Number SO BT Difficulty Time (min.) BE1 AP Simple 2–4 BE2 AP Simple 3–5 BE3 AP Simple 4–6 BE4 AP Simple 4–6 BE5 AP Simple 6–8 BE6 AP Simple 2–4 BE7 AP Simple 2–4 BE8 AP Simple 3–5 BE9 AP Simple 2–4 BE10 AP Simple 3–5 DI1 C Simple 2–4 DI2 AP Simple 4–6 DI3 AP Simple 8–10 DI4 AP Moderate 6–8 EX1 C Simple 6–8 EX2 AP Simple 6–8 EX3 AP Simple 4–6 EX4 AP Simple 10–12 EX5 AP Simple 8–10 EX6 AP Simple 6–8 EX7 AP Simple 8–10 EX8 AP Simple 6–8 EX9 AP Simple 6–8 EX10 AP Simple 6–8 EX11 AP Simple 4–6 EX12 AP Simple 6–8 EX13 AP Simple 4–6 EX14 AP Moderate 8–10 EX15 6, AP Moderate 6–8 P1A 2, AP Simple 20–30 P2A 3, AP Moderate 30–40 P3A AP Moderate 30–40 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 12-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ACCOUNTING FOR PARTNERSHIPS (Continued) Number SO BT Difficulty Time (min.) P4A AP Moderate 30–40 P5A AP Moderate 30–40 P1B 2, AP Simple 20–30 P2B 3, AP Moderate 30–40 P3B AP Moderate 30–40 P4B AP Moderate 30–40 P5B AP Moderate 30–40 BYP1 — C Simple 8–10 BYP2 1–3 C, E Simple 15–20 BYP3 2, S Simple 10–15 BYP4 E Simple 10–15 BYP5 S Simple 15–20 12-4 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual Exploring the Web Decision Making Across the Organization Broadening Your Perspective Q12-17 Q12-18 *6 Explain the effects of the entries when a new partner is admitted Q12-22 Q12-23 Q12-12 Q12-13 Q12-14 Explain the effects of the entries to record the liquidation of a partnership *7 Describe the effects of the entries when a partner withdraws from the firm Q12-11 Describe the form and content of partnership financial statements Q12-21 BE12-9 BE12-10 E12-13 Q12-19 Q12-20 BE12-7 BE12-8 E12-11 Q12-15 Q12-16 BE12-6 DI12-3 DI12-4 E12-6 E12-7 P12-1A Q12-8 Q12-10 BE12-3 BE12-4 BE12-5 Q12-6 Q12-7 Q12-9 Q12-24 DI12-1 E12-1 E12-14 E12-15 P12-5A P12-5B E12-12 E12-15 P12-4A P12-4B E12-8 E12-9 E12-10 P12-3A P12-3B P12-2A P12-1B P12-2B DI12-2 E12-4 E12-5 P12-2A P12-2B E12-3 P12-1A P12-1B Application Identify the bases for dividing net income or net loss Q12-1 Q12-2 Q12-3 Q12-4 Comprehension Q12-5 BE12-1 BE12-2 E12-2 Knowledge Explain the accounting entries for the formation of a partnership Identify the characteristics of the partnership form of business organization Study Objective Analysis Evaluation Communication Decision Making All About You Across the Organization Ethics Case Synthesis Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com BLOOM’S TAXONOMY TABLE (For Instructor Use Only) 12-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ANSWERS TO QUESTIONS (a) Association of individuals A partnership is a voluntary association of two or more individuals based on as simple an act as a handshake Preferably, however, the agreement should be in writing A partnership is both a legal entity and an accounting entity, but it is not a taxable entity (b) Limited life A partnership does not have unlimited life A partnership may be ended voluntarily or involuntarily Thus, the life of a partnership is indefinite Any change in the members of a partnership results in the dissolution of the partnership (c) Co-ownership of property Partnership assets are co-owned by all the partners If the partnership is terminated, the assets not legally revert to the original contributor Each partner has a claim on total assets equal to his or her capital balance This claim does not attach to specific assets the individual partner contributed to the firm (a) Mutual agency This characteristic means that the act of any partner is binding on all other partners when engaging in partnership business This is true even when the partners act beyond the scope of their authority, so long as the act appears to be appropriate for the partnership (b) Unlimited liability Each partner is personally and individually liable for all partnership liabilities Creditors’ claims attach first to partnership assets and then to personal resources of any partner, irrespective of that partner’s equity in the partnership The advantages of a partnership are: (1) combining skills and resources of two or more individuals, (2) ease of formation, (3) freedom from governmental regulations and restrictions, and (4) ease of decision making Disadvantages are: (1) mutual agency, (2) limited life, and (3) unlimited liability A limited partnership is used when a general partner(s) wish to raise cash without involving outside investors in management of the business Limited partners in this case have limited personal liability for business debts as long as they don’t participate in management Sampson’s capital account balance should be $102,000, comprised of land $65,000, and equipment $57,000, less debt $20,000 When the partnership agreement does not specify the division of net income or net loss, net income and net loss should be divided equally Factors to be considered in determining how income and loss should be divided are: (1) a fixed ratio is easy to apply and it may be an equitable basis in some circumstances; (2) capital balance ratios when the funds invested in the partnership are considered the most critical factor; and (3) salary allowance and/or interest allowance coupled with a fixed ratio This last approach gives specific recognition to differences that may exist among partners by providing salary allowances for time worked and interest allowances for capital invested The net income of $36,000 should be divided equally—$18,000 to M Carson and $18,000 to R Leno (a) Account debited: Income Summary; accounts credited: S McMurray, Capital and F Kohl, Capital (b) Account debited: S McMurray, Drawing; account credited: Cash 12-6 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Questions Chapter 12 (Continued) 10 Division of Net Income Salary Allowance Deficiency: ($10,000) ($45,000 – $55,000) T Evans (60% X $10,000) R Meloy (40% X $10,000) Total division T Evans R Meloy Total ($30,000) ($25,000) ($55,000) ( (6,000) ( ($24,000) (4,000) ($21,000) ( (6,000) ( (4,000) ($45,000) 11 The financial statements of a partnership are similar to those of a proprietorship The differences are due to the number of partners involved The income statement for a partnership is identical to the income statement for a proprietorship except for the detailed information concerning the division of net income The owners’ equity statement is called the partners’ capital statement This statement shows the changes in each partner’s capital account and in total partnership capital during the year On the balance sheet each partner’s capital balance is reported in the owners’ equity section 12 Liquidation of a partnership ends both the legal and economic life of the entity Partnership dissolution occurs whenever a partner withdraws or a new partner is admitted Dissolution does not necessarily mean that the business ends If the continuing partners agree, operations can continue without interruption by forming a new partnership 13 No, Bobby is not correct All gains and losses on liquidation should be allocated to the partners on the basis of their income ratio However, final cash distributions should be based on their capital balances 14 Yes, Bill is correct Capital balances are used because they represent the individual partner’s equity in the partnership The objective of the distribution is to eliminate the balance in each partner’s capital account 15 Total cash after paying liabilities Total capital balances ($34,000 + $31,000 + $28,000) Excess (gain on sale of noncash assets) $109,000 93,000 $ 16,000 Allocated to Keegan ($16,000 X 3/10) $ 4,800 Cash to Keegan ($31,000 + $4,800) $ 35,800 16 Capital deficiency, M Jeter $ 8,000 Loss allocated to: L Pattison, capital ($8,000 X 3/8) $ 3,000 Cash to L Pattison ($12,000 – $3,000) $ 9,000 *17 This transaction represents the purchase of an existing partner’s interest It is a personal transaction that has no effect on partnership net assets Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 12-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Questions Chapter 12 (Continued) *18 Partnership net assets increase $25,000 No, Steve Renn does not necessarily acquire a 1/6 income ratio Unless stated otherwise, net income or net loss is divided evenly among all partners *19 Grant, Capital Kate Robidou, Capital 66,000 *20 Tracy Harper, Capital Kim Remington, Capital 39,000 *21 Newlin’s share of the bonus is $3,000 computed as follows: Partnership assets Capital credit, Perry Bonus to retiring partner Allocated to: Garland: $8,000 X 5/8 = Newlin: $8,000 X 3/8 = 66,000 39,000 $85,000 77,000 8,000 $5,000 3,000 8,000 $ *22 Recording the revaluations violates the cost principle, which requires that assets be stated at original cost It is also a departure from the going-concern assumption, which assumes the entity will continue indefinitely *23 When a partner dies, it is usually necessary to determine the partner’s equity at the date of death by: (1) determining the net income or loss for the year to date, (2) closing the books, and (3) preparing financial statements The partnership agreement may also require an audit of the financial statements by independent auditors and a revaluation of assets by an appraisal firm 24 A partnership is an association of two or more persons to carry on as co-owners of a business for profit PepsiCo is a corporation since its has thousands of owners (called stockholders) 12-8 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 12-1 Cash Equipment Stanley Farrin, Capital 10,000 5,000 15,000 BRIEF EXERCISE 12-2 Accounts Receivable Less: Allowance for doubtful accounts Equipment $16,000 2,500 $13,500 11,000 Accumulated depreciation should not be shown because a new company cannot have any accumulated depreciation BRIEF EXERCISE 12-3 The division is: Held $42,000 ($70,000 X 60%) and Bond $28,000 ($70,000 X 40%) The entry is: Income Summary 70,000 Held, Capital 42,000 Bond, Capital 28,000 BRIEF EXERCISE 12-4 Division of Net Income Salary allowance Remaining income, $30,000: ($55,000 – $25,000) C ($30,000 X 50%) S ($30,000 X 30%) N ($30,000 X 20%) Total remainder Total division of net income Copyright © 2009 John Wiley & Sons, Inc Espino Sears Utech Total $15,000 $ 5,000 $ 5,000 $25,000 9,000 000,000 6,000 15,000 $30,000 $14,000 Weygandt, Accounting Principles, 9/e, Solutions Manual $11,000 30,000 $55,000 (For Instructor Use Only) 12-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com BRIEF EXERCISE 12-5 Division of Net Income Salary allowance Interest allowance Remaining deficiency, ($9,000): [($25,000 + $12,000) – $28,000] Joe ($9,000 X 50%) Sam ($9,000 X 50%) Total remainder Total division of net income Joe Sam Total $15,000 7,000 $10,000 5,000 $25,000 12,000 (4,500) (4,500) $17,500 $10,500 (9,000) $28,000 BRIEF EXERCISE 12-6 A, Capital L, Capital F, Capital Cash 8,000 7,000 4,000 19,000 *BRIEF EXERCISE 12-7 Cox, Capital Day, Capital 10,000 10,000 *BRIEF EXERCISE 12-8 Cash Menke, Capital (50% X $11,900*) Hibbett, Capital (50% X $11,900) Kosko, Capital (45% X $142,000) 52,000 5,950 5,950 63,900 *[($40,000 + $50,000 + $52,000) X 45%] – $52,000 = $11,900 12-10 Copyright © 2009 John Wiley & Sons, Inc Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com NOTES ... Q12-8 Q12-10 BE12-3 BE12-4 BE12-5 Q12-6 Q12-7 Q12-9 Q12-24 DI12-1 E12-1 E12-14 E12-15 P12-5A P12-5B E12 -12 E12-15 P12-4A P12-4B E12-8 E12-9 E12-10 P12-3A P12-3B P12-2A P12-1B P12-2B DI12-2 E12-4... firm Q12-11 Describe the form and content of partnership financial statements Q12-21 BE12-9 BE12-10 E12-13 Q12-19 Q12-20 BE12-7 BE12-8 E12-11 Q12-15 Q12-16 BE12-6 DI12-3 DI12-4 E12-6 E12-7 P12-1A... DI12-2 E12-4 E12-5 P12-2A P12-2B E12-3 P12-1A P12-1B Application Identify the bases for dividing net income or net loss Q12-1 Q12-2 Q12-3 Q12-4 Comprehension Q12-5 BE12-1 BE12-2 E12-2 Knowledge