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    Partnership Acctg

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    cessbright
    Dorr will be admitted to the Apple, Bere, and Carroll partnership with a 20% capital interest and share of net income/losses in exchange for a cash investment. To determine the amount, the total current partner's capital is $150,000. For Dorr to have a 20% capital interest, the total capitalization implied is $187,500, so Dorr should invest $37,500 to acquire the 20% interest.

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    Partnership Acctg

    Uploaded by

    cessbright
    123 views3 pages
    Dorr will be admitted to the Apple, Bere, and Carroll partnership with a 20% capital interest and share of net income/losses in exchange for a cash investment. To determine the amount, the total current partner's capital is $150,000. For Dorr to have a 20% capital interest, the total capitalization implied is $187,500, so Dorr should invest $37,500 to acquire the 20% interest.

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    Dorr will be admitted to the Apple, Bere, and Carroll partnership with a 20% capital interest and share of net income/losses in exchange for a cash investment. To determine the amount, the total current partner's capital is $150,000. For Dorr to have a 20% capital interest, the total capitalization implied is $187,500, so Dorr should invest $37,500 to acquire the 20% interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    123 views3 pages

    Partnership Acctg

    Uploaded by

    cessbright
    Dorr will be admitted to the Apple, Bere, and Carroll partnership with a 20% capital interest and share of net income/losses in exchange for a cash investment. To determine the amount, the total current partner's capital is $150,000. For Dorr to have a 20% capital interest, the total capitalization implied is $187,500, so Dorr should invest $37,500 to acquire the 20% interest.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    . The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively.

    The capital account balances on January 1, 2008, were as follows: The carrying amounts of the assets
    and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the
    partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash
    investment. The amount of cash that Dorr should invest in the partnership is:

    Apple, Capital P25,000


    Bere, Capital 75,000
    Caroll, Capital 50,000
    Total Partner’s Capital P150,000

    A) P25,000. D) P75,000.
    B) P30,000. E) P90,000.
    C) P37,500.

    Answer: C (P150,000/.8=P187,500. P187,500 – P150,000 = P37,500 to invest)

    Use the following information for questions 6, 7 and 8.

    A summary balance sheet for the McCune, Nall, and Oakley partnership appears below. McCune, Nall,
    and Oakley share profits and losses in a ratio of 2:3:5, respectively.

    Assets
    Cash P 50,000
    Inventory 62,500
    Marketable securities 100,000
    Land 50,000
    Building-net 250,000
    Total assets P 512,500

    Equities
    McCune, capital P 212,500
    Nall, capital 200,000
    Oakely, capital 100,000
    Total equities P 512,500

    The partners agree to admit Pavic for a one-fifth interest. The fair market value of partnership land is
    appraised at P100,000 and the fair market value of inventory is P87,500. The assets are to be revalued
    prior to the admission of Pavic and there is P15,000 of goodwill that attaches to the old partnership.
    7. By how much will the capital accounts of McCune, Nall, and Oakley increase, respectively,
    due to the revaluation of the assets and the recognition of goodwill?
    a. The capital accounts will increase by P25,000 each.
    b. The capital accounts will increase by P30,000 each.
    c. P18,000, P27,000, and P45,000.
    d. P20,000, P25,000, and P30,000.

    Answer c The assets will be valued upward by P90,000 which, allocated on a 2:3:5 basis, yields
    P18,000 to McCune, P27,000 to Nall, and P45,000 to Oakely.

    8. How much cash must Pavic invest to acquire a one-fifth interest?


    a. P117,500.
    b. P120,500.
    c. P146,875.
    d. P150,625.

    Answer d After the revaluation, the assets will be recorded at P602,500. If Pavic is admitted
    for a one-fifth interest, the P602,500 represents 80% of the total implied capital.
    Dividing P602,500 by 80% gives a total capitalization of P753,150 for which
    P150,625 is required from Pavic for a 20% interest.

    9. What will the profit and loss sharing ratios be after Pavic’s investment?
    a. 1:2:4:2.
    b. 2:3:5:2.
    c. 3:4:6:2.
    d. 4:6:10:5.

    Answer d Each of the original partners has given up 20% of their interest to Pavic. Their profit and
    loss sharing ratios will therefore be 80% of what they were before the admission of
    Pavic.

    McCune 20% x 80% = 16%

    Nall 30% x 80% = 24%

    Oakely 50% x 80% = 40%

    Pavic = 20%

    Expressed as: 4:6:10:5

    10. He refers to a partner who contributed not only money and property but also industry to the newly
    formed partnership.
    a. Industrial Partner
    b. Nominal Partner
    c. Capitalist-industrial Partner
    d. Capitalist Partner

    Answer: c

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