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Principles of Accounting, Volume 1: Financial Accounting

Problem Set A

Principles of Accounting, Volume 1: Financial AccountingProblem Set A

Problem Set A

PA 1.

LO 15.3The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after Tatum receives a 10,000 salary and Brook receives a 15,000 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is:

  1. $40,000
  2. $25,000
  3. ($5,000)

In addition, show the resulting entries to each partner’s capital account. Tatum’s capital account balance is $50,000 and Brook’s is $60,000.

PA 2.

LO 15.4Arun and Margot want to admit Tammy as a third partner for their partnership. Their capital balances prior to Tammy’s admission are $50,000 each. Prepare a schedule showing how the bonus should be divided among the three, assuming the profit or loss agreement will be 1:3 once Tammy has been admitted and her contribution is:

  1. $20,000
  2. $80,000
  3. $50,000.

In addition, show the resulting journal entries to each of the three partners’ capital accounts.

PA 3.

LO 15.5When a partnership is liquidated, any gains or losses realized by the sale of noncash assets are allocated to the partners based on their income sharing ratio. Why?

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