Re: Accounting Homework

Each attachment is worth 5 pts for me. So please reasonable about the quote.

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ta & Forms P

0

9-01

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e

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Problem 9-1: Allowan

c

e Write-O

f

f Method of Dealing with Bad Debts Student Name: Given Data P09-01 1. Journalize transactions a through f in the general journal

below. Company’s data and journal entry information: General Journal Selected account balances from a company’s general ledger are listed

below. Cash $

200,000 Trans. Accounts Receivable

(beginning balance) 107,000 No. Account Titles Debit Credit Allowance for Doubtful Accounts (beginning normal balance) 5

,000 1a Instructions: 1b 1. Journalize the transactions a through f assuming the company uses the allowance write-off method. a. Made cash sales of $1,000,000. 1c b. Made credit sales of $800,000. c. Collected $700,000 during year from customers on account. d. Wrote off bad debts of $7,000 per year. 1d e. Recovered bad debts of $

6

00 from previous year. f. Recovered bad debts of $

4

00 from current year. 1e 2. Post transactions a through f to the general ledger accounts provided below the general journal. 3. After posting a through f, the balance of the

Allowance for Bad Debts account should be a $1,000 debit. Assuming a debit of $1,000, 1f a. Calculate the year-end bad debt adjusting entry amount assuming the company uses the aging of receivables method and realizable receivables are estimated at 95% of ending accounts receivable

and journalize the adjusting entry. (Hint: What is bad debt amount?) b. Calculate the year-end bad debt adjusting entry amount assuming the company uses the percent of sales method where 1.25% of credit sales are estimated to be uncollectible and journalize the adjusting entry. 2. Post transactions a through f to the following general ledger accounts. 4. Assume the Allowance for Bad Debts account had a $1,000 normal credit General Ledger Accounts balance instead of the debit balance. a. Calculate the year-end bad debt adjusting entry amount if the

Cash

Account No. 101 company uses the aging of receivables method and realizable Trans.

Explanation

Debit Credit

Balance receivables are estimated at 95% of ending accounts receivable

Bal.

200,000 200,000
and journalize the adjusting entry. (Hint: What is bad debt amount?)

a
b. Calculate the year-end bad debt adjusting entry amount if the

c
company uses the percent of sales method where 1.25% of credit e
sales are estimated to be uncollectible and journalize the adjusting entry. f
Note:

The allowance write-off method estimates bad debts and records this

Accounts Receivable Account No.

102 estimate in the year of the sales. Thus, the allowance method is considered Date

Explanation Debit Credit Balance
better than the direct write-off method because it does match revenues and

Bal. 107,000 107,000
expenses in the

same accounting period.

It uses an Allowance account and

b
makes an adjusting entry at the end of each fiscal period.

c
d
e

e

f

f

Allowance for Bad Debts Account No.

103 Date Explanation Debit Credit Balance
Bal. 5,000 5,000

d
e
f

Capital

Account No.

301

Date Explanation Debit Credit Balance

Bal.

302,000

302,000
Sales

Account No.

401

Date Explanation Debit Credit Balance

a
b
3. After posting a through f, the balance of the Allowance for Bad Debts 0 account should be a $1,000 debit. Assuming a debit of $1,000,
a. Calculate the year-end bad debt adjusting entry amount assuming the
company uses the aging of receivables method and realizable
receivables are estimated at 95% of ending accounts receivable and journalize the adjusting entry. (Hint: What is bad debt amount?)
b. Calculate the year-end bad debt adjusting entry amount assuming the
company uses the percent of sales method where 1.25% of credit
sales are estimated to be uncollectible and journalize the adjusting entry.
Note:

3a When using the aging of receivables method, the balance in the Allowance account must be considered. When using the percent of sales mehtod, the Allowance 3b account balance is not considered. 4. Assume the Allowance for Bad Debts account had a $1,000 normal credit
balance instead of the debit balance.
a. Calculate the year-end bad debt adjusting entry amount if the

company uses the aging of receivables method and realizable

receivables are estimated at 95% of ending accounts receivable
and journalize the adjusting entry. (Hint: What is bad debt amount?)
b. Calculate the year-end bad debt adjusting entry amount if the

company uses the percent of sales method where 1.25% of credit
sales are estimated to be uncollectible and journalize the adjusting entry.

Note:

4a

When using the aging of receivables method, the balance in
the Allowance account must be considered.

When using the percent of sales mehtod, the Allowance

4b

account balance is not considered.

Data & Forms P09-02

Student Name:

1. Journalize transactions a through f in the general journal below.

Company’s data and journal entry information:
General Journal

Selected account balances from a company’s general ledger are listed
below. Trans.

No. Account Titles Debit Credit

1a

Instructions:
1b
1. Journalize the transactions a through f assuming the company uses

a. Made cash sales of $1,000,000. 1c
b. Made credit sales of $800,000.
c. Collected $700,000 during year from customers on account.
d. Wrote off bad debts of $7,000 per year. 1d
e. Recovered bad debts of $600 from previous year.

1e
2. Post transactions a through f to the general ledger accounts provided
below the general journal.

1f

same accounting period. 2. Post transactions a through f to the following general ledger accounts.

General Ledger Accounts

on the income statement.

Cash Account No. 101

Trans. Explanation Debit Credit Balance
Bal. 200,000 200,000

a

c

e
f

Accounts Receivable Account No. 102

Date Explanation Debit Credit Balance

Bal. 102,000 102,000

b
c
d
e
e
f
f

Capital Account No. 301
Date Explanation Debit Credit Balance
Bal. 302,000 302,000

Sales Account No. 401
Date Explanation Debit Credit Balance
a
b

Bad Debts Expense Account No.

Date Explanation Debit Credit Balance
d
f

Account No.

written off in previous accounting periods. It is a contra expense account, Date Explanation Debit Credit Balance

e

Problem 9-2: Direct Write-Off Method of Accounting for Bad Debts
	Given Data:
Cash	$200,000
Accounts Receivable (beginning balance)			102,000
the direct write-off method.
f. Recovered bad debts of $400 from current year.
Notes:
The direct write-off method waits until it is determined who is not
going to pay and then the account is written off directly to the Bad Debts
Expense account. There is no Allowance account used; therefore, there
are no adjusting entries to make. A bad debt may be recorded in a year
different from the year of the sale. Thus, the direct write-off method is not
the best method because it does not match revenues and expenses in the
Bad Debts Recovered is used to show cash collections for accounts
	written off in previous accounting periods. It is a contra expense account,
which is deducted from	Bad Debts Expense
	501
Note: Bad Debts Recovered is used to show cash collections for accounts	Bad Debts Recovered (a contra expense account)		502
which is deducted from Bad Debts Expense on the income statement.

Data & Forms P09-03A

Student Name:

Given Data:
Instructions: General Journal

Trans.

No. Account Titles Debit Credit

1a

1b

. Received a $40,000, 90-day, 12% note from customer to apply on

. Make adjusting entry for accrued interest on December 31.

. Collected note on March 1 (collected in different period from receipt).

2a

2b

2c
3a

. Made credit card sales of $1,000 with a 3% fee, for which credit card

. Received cash from credit card company through electronic funds

3b

4
5
6
7a
7b
General Ledger Accounts
Cash Account No. 101

Trans. Explanation Debit Credit Balance

Bal.

100,000

1b

2c
3a
4
5
6
Notes Receivable Account No. 102

Date Explanation Debit Credit Balance
1a
1b

2a

2c
3a

3b
Accounts Receivable Account No. 103

Date Explanation Debit Credit Balance
Bal. 100,000 100,000
2a
3b
4

7a
7b

Account No. 103

Date Explanation Debit Credit Balance

2b

2c

Account No.

Date Explanation Debit Credit Balance
5

Sales Account No. 401
Date Explanation Debit Credit Balance

Bal. 200,000 200,000

1a
6
7a

Account No.

Date Explanation Debit Credit Balance
1b
2b
2c
3b

Account No. 501

Date Explanation Debit Credit Balance
4

Account No. 502

Date Explanation Debit Credit Balance
6
7a

Problem 9-3:	Notes Receivable
Journalize and post the following note transactions. (Use 360 days in a
year for interest calculations.)
1a. Received a $30,000, 90-day, 12% note from a sale on October 1 and
1b. Collected the note and interest on December 30 (within the same
period).
			2a
account on December 1.
			2b
					2c
3a. Received a $60,000, 60-day, 10% note for loaning cash on October 1.
3b. Customer dishonored note on November 30.
4. Sold $20,000 of accounts receivable and is charged a 3% factoring fee.
5. Borrowed $30,000 cash, pledging receivables of $35,000 as security.
6. Made credit card sales of $1,000 with a 3% fee, receiving cash
immediately.
				7a
sales receipts are remitted electronically to credit card company.
		7b
transfer.
2. Post transactions 1 through 7 to the following general ledger accounts.
			100,000
7b
Interest Receivable
Accounts Payable	201
Interest Revenue	402
Factory Fee Expense
Credit Card Expense

2

>Data & Forms P

1 0

-01

Depreciation Methods

,000. The company estimates that it will use the asset for 4 years or 12,000 hours before disposing of it.

1;

,000 hours

,000 hours in Year 4.)

Straight-line method (required)

Year

1

2
3
4

Units of activity (production) method (required)

Show Calculations:
Year Depreciation Expense Accumulated Depreciation Book Value

1

2
3
4
Total

Declining-balance method (required)

Show Calculations:
Year Depreciation Expense Accumulated Depreciation Book Value
1
2
3
4
Total

Show Calculations:
Year Depreciation Expense Accumulated Depreciation Book Value
1
2
3
4
Total

Problem 10-1:

Student Name:

Given Data:

A company purchases an asset for $1

4

At the end of that use, the company estimates that will receive $2,000 in salvage value.

Instructions:

Compute the yearly depreciation using the following different methods. Using the information different methods, compute the yearly depreciation

for each year and the accumulated depreciation and book value at the end of each year.

1.     Straight-line (Required)

2.     Units of activity (production) (Required)

(The company used the asset 1,000 hours in

Year

3

in Year 2; 4,000 hours in Year 3; and

5

3.     Declining-balance (Required)

4.     Sum-of-years-digits (Optional)

Part 1:

Write the formula for calculating yearly depreciation using the straight-line method.

Show Calculations:

Depreciation Expense

Accumulated Depreciation

Book

Value

Total

Part 2:

(The company used the asset 1,000 hours in Year 1, 3,000 hours

in Year 2, 4,000 hours in Year 3, and 5,000 hours in Year 4.

Write the formula for calculating depreciation per unit?

Write the formula for calculating yearly depreciation using depreciation per unit?

Part 3:

Write the formula for the declining-balance rate.

Write the formula for calculating yearly deprecation using the declining-balance method.

Part 4: Sum-of-years digits method (optional and not tested)

Write the formula for the fraction used in the sum-of-years-digits method.

Write the formula for calculating yearly deprecation using the sum-of-years-digits method.

Data & Forms P10-02

, Allocation, Purchase, and Calculation of Depreciation

Student Name:

Given Data:

07, at a total cash price of $787,500 for a building, land, land improvements, and six vehicles. The estimated market values of the assets

; land, $

; land improvements, $

; and vehicles, $

. The company’s fiscal year ends on December 31.

Instructions:

-year life and a $

,650

salvage value.

depreciation results in payment of less taxes over the asset’s life.

EXAMPLE CONSTRUCTION

408,000 Value

Cost

289,000 Building

42,500 Land

110,500

Vehicles

15

25,650

5

EXAMPLE CONSTRUCTION
Instructions:

Building

Land

Land Improvements

Vehicles

Part 2:

Part 3:

4. Defend or refute this statement: Accelerated

Problem 10-02:		Cost
Example Construction negotiates a lump-sum purchase of several assets from a compamy that is going out of business. The purchase is completed on
January 1,		20
are building, $	408,000	289,000	42,500	110,500
1a. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased (round percents to the nearest 1%).
1b. Prepare the jouranml entry to record the purchase.
2. Compute the depreciation expense for year 2007 on the building using the straight-line methjod, assuming a	15		25
3. Compute the depreciation expense for year 2007 on the land improvements, assuming a five-year life and double-declining-balance depreciation.
	4. Defend or refute this statement: Accelerated
Part 1a:
		EXAMPLE CONSTRUCTION
	Schedule
Cash price for all assets purchased	$ 787,500
Estimated market values:		Appraised		Percentage		Apportioned
		Building		of Total
							Land		x: Enter appropriate data in yellow cells. Your answers for “Apportioned Cost” will be verified.
Land improvements
		Vehicles		Land		Improvements
Building:
				Useful life in years			Totals
				Salvage value
Land improvements useful life in years
Part 1b:
Check figures:
		General Journal
(2)	$ 30,000
(3)	10,800
	Trans.
	Date		Account Titles		no.		Debit		Credit
Jan. 1
	x: Enter appropriate data in yellow cells. Your Credit entry will be verified.
1a. Allocate cash price paid for all assets purchased
based on estimated market values of assets.
	Cash
1b. Prepare journal entry for purchase of assets.
2. Use the straight-line method to calculate depreciation
for building for Year 1.	Straight-line depreciation on building =
3. Use the declining-balance method to calculate
depreciation for the land improvements.
Double-declining-balance
depreciation on land improvements =
depreciation results in payment of less taxes
of the asset’s life.
Part 4: Defend or refute this statement: Accelerated depreciation
results in payment of less taxes over the asset’s life.
x: Enter a short answer in the space provided.

Data & Forms P10-03

Student Name:

Given Data:

will be a company office; it is appraised at $

, with a useful life of 20 years and an $

salvage value. A lighted parking lot near

) valued at $

that are expected to last another

years with no salvage value. Without the

. Example also incurs the following additional costs:

), having

salvage value

) near

Instructions:

Part 1:
EXAMPLE C CO.

Schedule

Appraised Percentage Apportioned

641,300 Value of Total Cost

Useful life in years 20 Land
x: Enter appropriate data in yellow cells. Your answers for “Apportioned Cost” will be verified.
Salvage value 80,000

Building 2
Land Improvements 1
Appraised value 408,100 Totals
Useful life in years 14
Salvage value 0

1,865,600

Land Land

Cost to demolish Building 1 422,600 Improvements Improvements
Cost of additional land grading 167,200 Land Building 2 Building 3 1 2

2,019,000

to construct

2,019,000

Useful life in years 25

Salvage value 390,100

Cost 158,000 Totals
Useful life in years 20

Salvage value 0

Part 2:
EXAMPLE C CO.
General Journal

Trans.
Date Account Titles no. Debit Credit

Land
x: Enter appropriate data in yellow cells. Your Credit entry will be verified.

Building 2

Building 3

Land Improvements 1

Land Improvements 2
Cash
Part 3:

EXAMPLE C CO.
General Journal

Dec. 31

Dec. 31

Dec. 31 Depreciation Expense, Land Improvements

Problem 10-03
In January 2007, Example C Company pays $2,800,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its
place.			Building 2	641,300	80,000
Building 1 has improvements (		Land Improvements 1	408,100	14
buildings and improvements, the tract of land is valued at $	1,865,600
	Cost to demolish Building 1	$	422,600
	Cost of additional land grading		167,200
Cost to construct new building (		Building 3
a useful life of 25 years and a $	390,100			2,019,000
Cost of new land improvements (	Land Improvements 2
Building 2, having a 20-year useful life and no salvage value		158,000
1. Complete the table in Part 1. Allocate the costs incurred by Example to the appropriate columns and total each column (round percents to the nearest 1%).
2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2007.
3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2007 when these assets were in use.
			EXAMPLE C CO.
Purchase price for land and 2 buildings	$ 2,800,000
Building 2:	Allocation of purchase price*:
	Appraised value
Land Improvements 1:
Appraised value of land only	Determination of cost for journal entry:
Building 3:	Purchase price *
x: Enter appropriate data in yellow cells. Your totals will be verified.		Cost	Demolition
Landgrading
New building
Land Improvements 2:	New improvements
Jan. 1
			Dec. 31	Depreciation Expense, Building 2
Accumulated Depreciation, Bldg. 2
Depreciation Expense, Building 3
Accumulated Depreciation, Bldg. 3
	Depreciation Expense, Land Improvements
Accumulated Depreciation, Land Imp. 1
Accumulated Depreciation, Land Imp. 2

Data & Forms P11-

0

1

:

purchase from

Frier

Bank

s:

of the note

paid

8,500

Maturity date

0 0 0

Term in days

Annual interest

,000

?

?

?

Term in days 60 0 0 0
Annual interest

Amount of note

21,000

interest for note

?

0
?

?

Total interest for note

0

TYTUS CO. COMPANY
Date

Credit

0

able (Frier)

Apr 20

Cash 0

May 19

0

0

Jul 8

0

0

0

Nov 28

0

Dec 31

0

0

0

Problem 11-01

Student

Name

Given Data:

Forms:

TYTUS CO.

TYTUS CO. COMPANY

Schedule

2006

Apr 20

Credit

Frier

$ 3

8,500

Community

UMB

May 19

Replaced Frier accounts payable with note

Bank

Term in days

90

1.

Maturity date

Annual interest

10%

Date

Cash

Term of the note (in days)

Balance of note

30,000

Jul 8

Borrowed from Community Bank

120

9%

2.

Interest due at maturity:

Amount of note

60

Principal of the note

?

Paid note to Frier at maturity

Annual interest rate

Paid note to Community Bank at maturity

Fraction of year

Nov 28

Issued/signed note to UMB Bank

Interest expense

8%

21,000

3.

Accrued interest on UMB note at end of 2006:

Face value

Total

Dec 31

Entered adjusting entry for interest

Fraction of term in 2006

accrued on note to UMB Bank

Accrued interest expense at end of 2006

2007

Paid note to UMB Bank at maturity

4.

Interest on UMB note for 2007:

Fraction of term in 2007

Interest expense in 2007

General Journal

Trans.

Account Titles

No.

Debit

Use the following account titles for the journal entries:

200

6.

Accounts

Pay

Interest Expense

Interest Payable

Merchandise Inventory

Notes Payable (Community Bank)

Notes Payable (Frier)

Notes Payable (UMB Bank)

Aug 17

Nov 5

200

7.

Jan 27

Enter appropriate data in yellow cells. Your entries for “Interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries for “Accrued interest expense” will be verified.
Enter appropriate data in yellow cells. Your entries for “Interest expense in 2005” will be verified.
Enter appropriate data in yellow cells. Your Credit entries will be verified.
Maturity date is
August 17
Maturity date is November 5
Maturity date is January 27

Data & Forms P11-02

Student Name:

Given Data: Forms:

LEGAL STARS

1.

pay

First 7,000

Total

First 7,000

Gross

Pay

0 0 0 0

through Gross

Name 8/18 Pay Tax

Dale

Ted

Kate

Chas

0 0 0 0 0

2.

8% Dale Ted Kate Chas Total

Earned this week

Tax rate

10

0 0 0 0 0

20

3.

Dale Ted Kate Chas Total
0 0 0 0 0
4.

Dale Ted Kate Chas Total
0 0 0 0 0

5.

es:

Dale Ted Kate Chas Total

Maximum base
Amount subject to tax
0 0 0 0

Earned this week

Subject to tax
Tax rate
FUTA tax

0 0 0 0 0

6.

es:

Dale Ted Kate Chas Total
Subject to tax
Tax rate

SUTA tax

0 0 0 0 0

7.

Dale Ted Kate Chas Total

0 0 0 0 0

8.

Dale Ted Kate Chas Total
Gross earnings

FICA Social Security taxes
FICA Medicare taxes
FUTA tax
SUTA tax
Health insurance

Total

0 0 0 0 0

Problem 11-02

LEGAL STARS

Payroll

Tax

Rate

Applied to

FICA-Social Security

6.20%

First

$ 8

7,000

Each employee’s FICA withholdings for Social Security:

FICA-Medicare

1.45%

Gross

FUTA

0.80%

Dale

Ted

Kate

Chas

SUTA

2.15%

Maximum base

Earned

through

8/18

Amount subject to tax

Current Week

WH

Earned this week

$ 86,200

$ 2,000

$ 252

Subject to tax

29,700

900

99

Tax rate

6,750

450

54

Social Security tax

1,050

400

36

Weekly health insurance premium

$16 each

Each employee’s FICA withholdings for Medicare (no limits):

Percentage of gross earnings contributed

by employer to pension fund

Check figures:

(3)

$ 15

8.

Medicare tax

(4)

54.38

(5)

5.

(7) Total net pay

3,032.52

Employer’s FICA taxes for Social Security:

Employer’s FICA taxes for Medicare:

Employer’s

FUTA tax

Earned through 8/18

The employer’s

SUTA tax

Each employee’s net (take-home) pay:

Gross earnings

Less:

FICA Social Security taxes

FICA Medicare taxes

Withholding taxes

Health insurance

Take-home pay

Employer’s total payroll-related expense for each employee:

Plus:

Pension contribution (8%)

Enter appropriate data in yellow cells. Your entries for “Amount subject to tax” and “Social Security tax” will be verified.
Round your answers for “Social Security tax” to two decimal places.
Round your answers for “Medicare tax” to two decimal places.
Round your answers for “Social Security tax” to two decimal places.
Round your answers for “Medicare tax” to two decimal places.
Enter appropriate data in yellow cells. Your entries for “Amount subject to tax” and “FUTA tax” will be verified.
Round your answers for “FUTA tax” to two decimal places.
Enter appropriate data in yellow cells. Your entries for “SUTA tax” will be verified.
Round your answers for “SUTA tax” to two decimal places.
Enter appropriate data in yellow cells. Your entries for “Take-home pay” will be verified.
Enter appropriate data in yellow cells. Your entries for “Total” will be verified.
Round your answers for “Pension contribution” to two decimal places.

Data & Forms P12-

0

1

arry all calculations to 4 decimal places rounded and enter as decimal.

aker

and

‘s

lternative

s

Baker 0

Farney 0

: In proportion to time devoted to business.

Plan B

Baker 0

Farney 0

Salary allowance of $3,000 monthly to Farney and balance in

Farney 0

: Salary allowance of $3,000 monthly to Farney,

interest on

Plan D

Baker 0

Farney 0

.

Baker Farney

/net loss to allocate

75,000

(answer goes here)

75,000

0 0

Calculations: Baker Farney Total
Net income/net loss to allocate 75,000
Total allocated (answer goes here) 75,000
0 0

Calculations: Baker Farney Total
Net income/net loss to allocate 75,000
Total allocated (answer goes here) 75,000
0 0

Calculations: Baker Farney Total
Net income/net loss to allocate 75,000
Total allocated (answer goes here) 75,000
0 0

.

Plan A: In the ratio of initial investments (Baker of $40,000 and Farney $60,000).
Calculations: Baker Farney Total

Net income/net loss to allocate 45,000
Total allocated (answer goes here) 45,000

0 0
Plan B: In the proportion of time devoted to the business. Baker works quarter-time
(10 hours per week) and Farney works full-time (40 hours per week).
Calculations: Baker Farney Total
Net income/net loss to allocate 45,000
Total allocated (answer goes here) 45,000
0 0
Plan C: Salary allowance of $3,000 monthly to Farney and balance in ratio of
initial investments.
Calculations: Baker Farney Total
Net income/net loss to allocate 45,000
Total allocated (answer goes here) 45,000
0 0
Plan D: Salary allowance of $3,000 monthly to Farney, 10% interest on initial
investments, and balance equally.
Calculations: Baker Farney Total
Net income/net loss to allocate 45,000
Total allocated (answer goes here) 45,000
0 0

Plan A: In the ratio of initial investments (Baker of $40,000 and Farney $60,000).
Calculations: Baker Farney Total

Net income/net loss to allocate

Total allocated (answer goes here) -18000

0 0
Plan B: In the proportion of time devoted to the business. Baker works quarter-time
(10 hours per week) and Farney works full-time (40 hours per week).
Calculations: Baker Farney Total
Net income/net loss to allocate -18000
Total allocated (answer goes here) -18000
0 0
Plan C: Salary allowance of $3,000 monthly to Farney and balance in ratio of
initial investments.
Calculations: Baker Farney Total
Net income/net loss to allocate -18000

Total allocated (answer goes here)

0 0
Plan D: Salary allowance of $3,000 monthly to Farney, 10% interest on initial
investments, and balance equally.
Calculations: Baker Farney Total

Net income/net loss to allocate -18,000

Total allocated (answer goes here) -18,000
0 0

Problem 12-01

Student Name:

Given Data:

Instructions:

C

First, calculate preliminary amounts needed for computing income/loss shares.

Cell is formatted to change decimal to percentage.

Next, calculate income/loss shares using all four plans for Years 1, 2, and 3.

Round income(loss) share to nearest dollar.

B

Farney

A

Plan

Preliminary

Calculations

to Share Net Incomes and Net Losses

Plan A: In the ratio of initial investment

Plans A and C

Percentages based on initial investments:

Baker’s initial investment

$ 40,000

Farney’s initial investment

60,000

Plan B

Percentages based on time:

Baker works quarter-time (10 hours a week).

Farney works full-time (40 hours a week).

Plan C:

Plans C and D

Salary allowance for the year

ratio of initial investments

Plan D

10%

10% interest allowances on beginning investments

initial investments, and balance equally

Year 1: Assume expected net income of $

75,000

Plan A: In the ratio of initial investments (Baker of $40,000 and Farney $60,000).

Calculations:

Total

Net income

Total allocated

Plan B: In the proportion of time devoted to the business. Baker works quarter-time

(10 hours per week) and Farney works full-time (40 hours per week).

Plan C: Salary allowance of $3,000 monthly to Farney and balance in ratio of

initial investments.

Plan D: Salary allowance of $3,000 monthly to Farney, 10% interest on initial

investments, and balance equally.

Year 2: Assume expected net income of $

45,000

Year 3: Assume expected net loss of $18,000.

-18000

-18,000

Enter appropriate data in yellow cells. Your answers will be verified.

Data & Forms P12-02

Student Name:

Given Data:

BRB PARTNERSHIP

contribution

contribution

,250

Plan Calculations Bill Ron

A

0 0 0 0

B

Plan C:

$ 40,000 Total allocated

0 0 0 0

45,000 C Net income

10%

Balance of income

Balance of income

0 0 0

BRB PARTNERSHIP

Income earned $ 104,500 Bill Ron Barb Total
Salary allowances

Interest allowances

Total

0 0 0 0

BRB PARTNERSHIP

0

0

0

31 Bill, Capital
Ron, Capital
Barb, Capital

0

0

0

Problem 12-02
Forms:
Part 1:
			BRB PARTNERSHIP
Income/Loss
		Bill	$ 183,750	Sharing
		Ron	1	31		Barb	Totals
Barb contribution	210,000
Expected annual net income	225,000	$225,000/3
Plans to share net incomes and losses:
Plan A: Share equally	$225,000x($183,750/$1,050,000)
Plan B: In ratio of initial contributions
Salary to Bill
Salary to Ron	30,000
Salary to Barb
Interest allowance on initial contributions		Salary allowances
Balance shared equally			Balance of income
	Interest allowances
Part 1 data:
Net income for year	$ 225,000	Balance allocated
Part 2 data:	Shares of partners
	Income earned		$ 104,500
Bill’s withdrawals	17,000	Part 2:
Ron’s withdrawals	24,000
Barb’s withdrawals	32,000	Statement of Partners’ Equity
For Year Ended December 31
Part 3 data:
Beginning capital balances
Plus: Investments by owners
Plus: Net income
Balance allocated equally
Total net income
Less partners’ withdrawals
Ending capital balances
Part 3:
General Journal
Date	Account Titles	Debit	Credit
Dec. 31	Income Summary
	Bill, Capital
	Ron, Capital
	Barb, Capital
Bill, Withdrawals
Ron, Withdrawals
Barb, Withdrawals

Enter appropriate data in yellow cells. Your answers for each plan will be verified.
Enter the formula used as text in this column.
Round your answers for “Shares of partners” to the nearest whole dollar.
Enter appropriate data in yellow cells. Your answers for “Ending capital balances” will be verified.
Enter appropriate data in yellow cells. Your Credit entries will be verified.
Enter appropriate data in yellow cells. Your Credit entries will be verified.