Partnership App
Partnership App
Partnership App
S M Z Total
Interest on Capital $4000 $2,,500 $3,000 $9,500
and Salary 24000 0 18000 42000
Remainder
Divided equally 16000 16000 16000 48000
S M Z Total
Interest on Capital $28,000 $2.500 $21,000 $51,500
and Salary
Excess allocation
($38,300 - $51,500) (4,400) (4.400) (4,400) (13,200)
Total 23,600 (1,900) 16,600 $38,300
S M Z Total
Interest on Capital and $28,000 $2,500 $21,000 $51,500
salary
Excess allocation
($15,100 + $51,500) (22,200) (22,200) (22,200) (66,600)
Total 5,800 (19,700) (1,200) (15,100)
Z, Capital 1.200
M, Capital 19,700
S, Capital 5,800
Income Summary 15,100
Example 4
1/1/2014 Aly and Ahmad agreed to compose a company with
capital 60,000 L.E divided between them equally .
Aly paid his part as:
16,000 inventory and the remained cash
Ahmad paid his part as:
12,000 building, 8,000 inventory, 4,000 furniture and the
remained cash
Required:
Journalize the entries
Prepare balance sheet
Solution
Division of the capital
Aly 30000
Ahmad30000
1. Journal
Items Dr Cr
Inventory 16,000
cash 14,000
Capital Aly 30,000
( Aly paid his part)
Building 12,000
Inventory 8,000
Furniture 4,000
Cash 6,000
Capital Ahmad 30,000
(Ahmad paid his part)
2. Balance sheet:-
Assets Liabilities
Capital:
Cash 20,000 Aly 30,000
Building 12,000 Ahmad 30,000
Furniture 4,000
Inventory 24,000
60,000 60,000
Example 5
Ahmad and Basem partners agreed to compose a company
with capital 240,000 L.E. divided 2:1.
Every partner agreed to pay his part as assets and liabilities of
his company
Assets Ahmad Basem Liabilities Ahmad Basem
Fixed Assets
Building 80,000 60,000 Capital 140,000 90,000
Furniture 24,000 4,000 Liabilities
Current Assets Creditors 12,000 10,000
Inventory 18,000 20,000 N/P 8,000 4,000
Debtors 10,000 6,000
Notes receivable 12,000 8,000
Cash 16,000 6,000
160,000 104,000 160,000 104,000
Division of the capital
Ahmad =240000 × 2 ÷ 3=160000
Basem =240000 × 1 ÷ 3=80000
Items Dr Cr
Building 80,000
Furniture 24,000
Inventory 18,000
Debtors 10,000
Notes receivable 12,000
Cash 16,000
Creditors 12,000
Notes payable 8,000
Capital Ahmad 140,000
Cash
Capital Ahmad 20,000
20,000
Building 60,000
Furniture 4,000
Inventory 20,000
Debtors 6,000
Notes receivable 8,000
Cash 6,000
Creditors 10,000
Notes payable 4,000
Capital Basem 90,000
Capital Basem
Example 6
Collected these information from a company for Karim and
Omar, they are partners and divided the profits equally
Fixed assets Capital
Building 4000 Karim 6000
Furniture 800 Omar 4000
Current assets Reserves 2.000
Inventory 6000 Liabilities
A/R 10000 Loan Karim 1000
Cash 1000 A/P 8700
Current acc. Karim 400 Current acc. Omar 500
Total 22.200 Total 22,200
The partners agreed to increase the capital to be 20,000 and divided the increase equally
and if you know :
The partners increase the capital by using :
1- The reserves
2- loan of the partner
3- Credit current account of the partner
4- Karim offers building 2,000
5- the partners will pay their accrued part as cash
Required: Journalize
2-make the new balance sheet
Items Karim Omar
Capital must be paid when increase 5000 5000
Building 2,000 --
Reserve 1000 1000
Current account 500
Loan 1000
Total balance 4000 1500
Amount must be paid for company 1000 3500
Building 2000
Capital Karim 2000
(recording the building offer)
Reserve 2,000
Capital Karim 1000
Capital Omar 1000
(Charge reserve to capital equally)
Loan Karim 1000
Capital Karim 1000
(transfer loan to capital)
Currant acc. Omar 500
Capital Omar 500
(transfer currant acc. to capital)
Cash 1000
Capital Karim 1000
(paid the accrued part cash)
Cash 3500
Capital Omar 3500
(paid the accrued part cash)
Example 7 :
K and H are partners in KH partnership , they share profits and losses equally
. The following is the balances for this partnership on Dec. 31 , 2014 :
Partnership
Balance sheet December 31, 2014
Assets Liabilities and owner equity
Cash 14,000 K Capital 60,000
A/R 22000 H Capital 60 000
Inventory 30000 Accounts payable 84000
loan receivable K 8000 Notes payable 70000
loan receivable H 20000
Equipment 140000
Building 40000
Total 274000 Total 274000
Partners agreed to reevaluate assets and liabilities to their fair value as
following :
Inventories $ 20000
Depreciation of equipment is 5% and building 10%
Unrecorded accounts payable 1000
Bad debts of 2000 .allowance for doubtful account 10% of accounts
receivable .
Partners decide to reduce the partner's capital with 40000 $ by using
reevaluation account and loan receivable for partners .
Total capital still will be shared equally .
Required :
Journal entries .
Re-evaluation account
Balance sheet .
Solution :
Available accounts receivable after bad debts = 22000- 2000= 20000
allowance for doubtful account = 20000 × 10% = 2000
Re-evaluation 4000
Accounts receivable 2000
allowance for doubtful account 2000
Re-evaluation 21000
Inventory 10000
Building 4000
Equipment 7000
Re-evaluation 1000
Accounts payable 1000
Re-evaluation account :
Accounts receivable 2000 K's Capital 13000
allowance for doubtful account 2000 H's Capital 13000
Inventory 10000
Building 4000
Equipment 7000
Accounts payable 1000
Total 26000 Total 26000
K's Capital 8000
H's Capital 20000
loan receivable K 8000
loan receivable H 20000
Cash 14000
K's Capital 1000
H's Capital 13000
Partnership
Balance sheet December 31, 2014
Assets Liabilities and owner equity
Cash 28,000 K Capital 40,000
A/R 20000 H Capital 40 000
(-)allowance for (2000) Accounts payable 85000
doubtful 20000 Notes payable 70000
Inventory 133000
Equipment 36000
Building
Total 235000 Total 235000