P12-26A Accounting for partner contributions, allocating profits and losses to the partners, preparing partnership financial statements
Lorena Lally and Allie Raras formed a partnership on March 15, 2014. The partners agreed to contribute equal amounts of capital. Lally contributed her sole proprietorship’s assets and liabilities (credit balances in parentheses) as follows: ( Lally, Capital $56,000)
Book Value Current Market Value
Accounts Receivable $ 12,300 $10,600
Merchandise Inventory 47,000 38,000
Prepaid Expenses 3,600 3,400
Store Equipment, Net 41,000 28,000
Accounts Payable (24,000) (24,000)
On March 15, Raras contributed cash in an amount equal to the current market value of Lally’s partnership capital. The partners decided that Lally will earn 70% of partnership profits because she will manage the business. Raras agreed to accept 30% of the profits. During the period ended December 31, the partnership earned net income of $74,000. Lally’s withdrawals were $42,000 and Raras withdrawals totaled $22,000.
1. Journalize the partners’ initial contributions.
2. Prepare the partnership balance sheet immediately after its formation on March 15, 2014.
3. Journalize the closing of the Income Summary and partner Withdrawal ac-counts on December 31, 2014.
P12-31A Allocating profits and losses to the partners, accounting for the liquidation of a partnership
ABC is a partnership owned by Alders, Byron, and Calvin, who share profits and losses in the ratio of 1:3:4. The account balances of the partnership at June 30 follow. (Byron, Capital Bal. $52,250)
Adjusted Trial Balance
June 30, 2014
Account Title Debit Credit
Cash $ 33,000
Non-cash Assets 117,000
Notes Payable $ 32,000
Alders, Capital 22,000
Byron, Capital 50,000
Calvin, Capital 53,000
Alders, Withdrawals 9,000
Byron, Withdrawals 27,000
Calvin, Withdrawals 49,000
Sales Revenue 164,000
Salaries Expense 74,000
Rent Expense 12,000
Total $ 321,000 $ 321,000
1. Prepare the June 30 entries to close the revenue, expense, income summary, and withdrawal accounts.
2. Open each partner’s capital T-account with the adjusted balance, post the closing entries to their accounts, and determine each partner’s ending capital balance.
3. Prepare the June 30 entries to liquidate the partnership assuming the non-cash assets are sold for $120,000.
P13-37A Journalizing stock issuance and cash dividends and preparing the stockholders’ equity section of the balance sheet
B-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes B-Mobile to issue 70,000 shares of 5%, $100 par value cumulative preferred stock, and 110,000 shares of $2 par value common stock. During the first month, B-Mobile completed the following transactions: (Total Stockholders’ Equity $504,000)
Oct. 2 Issued 19,000 shares of common stock for a building with a market value of $250,000.
6 Issued 800 shares of preferred stock for $110 per share.
9 Issued 15,000 shares of common stock for cash of $90,000.
10 Declared a $16,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.
25 Paid the cash dividend.
1. Record the transactions in the general journal.
2. Prepare the stockholders’ equity section of B-Mobile’s balance sheet at October 31, 2014. Assume B-Mobile’s net income for the month was $92,000.
P13-38A Journalizing dividends and treasury stock transactions and preparing the stockholders’ equity section of the balance sheet
Summerborn Manufacturing, Co. completed the following transactions during 2014: (Nov. 8 Treasury Stock $6,500 CR)
Jan. 16 Declared a cash dividend on the 5%, $100 par noncumulative preferred stock (900 shares outstanding). Declared a $0.30 per share dividend on the 80,000 shares of $6 par value common stock outstanding. The date of record is January 31, and the payment date is February 15.
Feb. 15 Paid the cash dividends.
Jun. 10 Split common stock 2-for-1.
Jul. 30 Declared a 50% stock dividend on the common stock. The market value of the common stock was $9 per share.
Aug. 15 Distributed the stock dividend.
Oct. 26 Purchased 1,000 shares of treasury stock at $13 per share.
Nov. 8 Sold 500 shares of treasury stock for $15 per share.
30 Sold 300 shares of treasury stock for $8 per share.
1. Record the transactions in Summerborn’s general journal.
2. Prepare the Summerborn’s stockholders’ equity section of the balance sheet as of December 31, 2014. Assume that Summerborn was authorized to issue 2,000 shares of preferred stock and 400,000 shares of common stock. Both preferred stock and common stock were issued at par. The ending balance of retained earnings as of December 31, 2014, is $2,050,000.