6. Week 7 Need Help to solve each solutions below where its says : A. Prepare jo
ID: 2597311 • Letter: 6
Question
6. Week 7
Need Help to solve each solutions below where its says :
A. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.)
B. (1 through 11) Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)
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Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O’Donnell invests a building worth $108,000 and equipment valued at $64,000 as well as $98,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances.
To entice O’Donnell to join this partnership, Reese draws up the following profit and loss agreement:
• O’Donnell will be credited annually with interest equal to 10 percent of the beginning capital balance for the year.
• O’Donnell will also have added to his capital account 10 percent of partnership income each year (without regard for the preceding interest figure) or $8,000, whichever is larger. All remaining income is credited to Reese.
• Neither partner is allowed to withdraw funds from the partnership during 2016. Thereafter, each can draw $9,000 annually or 15 percent of the beginning capital balance for the year, whichever is larger.
The partnership reported a net loss of $8,000 during the first year of its operation. On January 1,
2017, Terri Dunn becomes a third partner in this business by contributing $21,000 cash to the partnership. Dunn receives a 20 percent share of the business’s capital. The profit and loss agreement is altered as follows:
• O’Donnell is still entitled to (1) interest on his beginning capital balance as well as (2) the share of partnership income just specified.
• Any remaining profit or loss will be split on a 6:4 basis between Reese and Dunn, respectively.
Partnership income for 2017 is reported as $82,000. Each partner withdraws the full amount that is allowed.
On January 1, 2018, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $150, 000 directly to Dunn. Net income for
2018 is $80,000 with the partners again taking their full drawing allowance.
On January 1, 2019, Postner withdraws from the business for personal reasons. The articles of partnership state that any partner may leave the partnership at any time and is entitled to receive cash in an amount equal to the recorded capital balance at that time plus 10 percent.
a. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries.
b. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries.
Complete these question by entering answers in the tabs below.
A. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.)
No
Date
General Journal
Debit
Credit
01/01/2016
Building
Equipment
Cash
O'Donnell, capital
Reese, capital
B. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)
1. Record the initial investment of assets by partners.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2016
2. Record the distribution of net income to partners.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2016
3. Record the admittance of Dunn into the partnership.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2017
4. Record entry to close drawings accounts.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2017
5. Record the distribution of net income to partners.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2017
6. Record the goodwill indicated by the purchase of Dunn's interest.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2018
7. Record the admittance of Postner into the partnership.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2018
8. Record entry to close drawings accounts.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2018
9. Record the distribution of net income to partners.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
12/31/2018
10. Record the goodwill indicated by the withdrawal of Postner.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2019
11. Record the final distribution to Postner.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
01/01/2019
No
Date
General Journal
Debit
Credit
01/01/2016
Building
Equipment
Cash
O'Donnell, capital
Reese, capital
Explanation / Answer
Steve Reese, Fort Worth, Texas A Journal Entries Debit Credit 01/01/2016 Building 108000 Equipment 64000 Cash 98000 Capital O'Donnell 270000 (Introduction of assets by O'Donnell) 31/12/2016 Interest on Partners' Capital 27000 Capital O'Donnell 27000 (10% Interest on O'Donnell's capital for the year 2016) 31/12/2016 Profit & Loss Account 8000 Capital O'Donnell 8000 (Credit of agreed minimum to O'Donnell's capital account in the absence of profits) 31/12/2016 Capital Reese 43000 Profit & Loss Account 43000 (Net balance of profit & loss account debited to Reese) Debit to Capital Reese: Net Operating Loss for the year 8000 Interest on Capital credited O'Donnell 27000 Minimum credit to O'Donnell 8000 43000 01/01/2017 Cash 21000 Capital Teri Dunn 21000 (Cash brought in by new partner Teri Dunn) WORKING: Partnership income 2017 82000 31/12/2017 Profit & Loss Account 30500 Beginning capital O'Donnell: 270000 27000 8000 305000 Capital O'Donnell 30500 (Interest on beginning capital credited to O'Donnell Profit & Loss Account (10% of partnership income or $8000 whichever is greater) Calculation of partnership income: 80000 Interest on O'Donnell's capital 30500 Share of profits O'Donnell 8000 Balance of net profit 41500 Distribution: Reese Capital (60%) 24900 Dunn Capital (40%) 16600 Partners' drawings: (9000 or 15% of the beginning capital) O'Donnell 15% of beginning capital 45750 31/12/2017 O'Donnell Drawings 45750 Cash 45750 01/01/2018 Dunn sells her interest to Judy Postner No entries required 01/01/2019 Judy Postner withdraws from the business Capital balance 21000 add ten per cent 2100 Payment to Judy Postner 23100 Capital Judy Postner 23100 Cash 23100 (Payment to Judy Postner on her withdrawing from partnership)
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