Chap015_Classproblems_solu

Chap015_Classproblems_solu - Solutions to Chapter 15...

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Solutions to Chapter 15 In‐class Problems 1 E15-2 Division of Income — Multiple Bases a. Distribution of $80,000 income: Angela Dawn Total Profit percentage 70% 30% 100% Average capital $ 50,000 $ 30,000 Net income $ 80,000 Interest on average capital (10%) $ 5,000 $ 3,000 (8,000) Salary 25,000 15,000 (40,000 ) Residual income $ 32,000 Allocate 70%:30% 22,400 9,600 (32,000 ) Total $ 52,400 $ 27,600 $ -0- b. Distribution of $20,000 income: Angela Dawn Total Profit percentage 70% 30% 100% Average capital $ 50,000 $ 30,000 Net income $ 20,000 Interest on average capital (10%) $ 5,000 $ 3,000 (8,000) Salary 25,000 15,000 (40,000 ) Residual income (deficit) $ (28,000) Allocate 70%:30% (19,600 ) (8,400 ) 28,000 Total $ 10,400 $ 9,600 $ -0- Section 401 of the UPA 1997 states that, “Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.”
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Solutions to Chapter 15 In‐class Problems 2 E15-3 Division of Income – Interest on Capital Balances Computation of average capital: Average capital for Left Months Months x Date Debit Credit Balance Maintained Dollar Balance 1/1 $30,000 3 $ 90,000 4/3 $8,000 38,000 5 190,000 8/28 $6,000 32,000 2 64,000 10/31 6,000 38,000 2 76,000 Total 12 $420,000 Average capital ($420,000 / 12 months) $ 35,000 Average capital for Right Months Months x Date Debit Credit Balance Maintained Dollar Balance 1/1 $50,000 2 $100,000 3/5 $9,000 41,000 4 164,000 7/6 $7,000 48,000 3 144,000 10/7 5,000 53,000 3 159,000 Total 12 $567,000 Average capital ($567,000 / 12 months) $ 47,250 Distribution of $50,000 income: Left Right Total Profit percentage 50% 50% 100% Average capital $35,000 $47,250 Net income $ 50,000 Interest on average capital (8%) $ 2,800 $ 3,780 (6,580 ) Residual income $ 43,420 Allocate 50%:50% 21,710 21,710 (43,420 ) Total $24,510 $25,490 $ -0-
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Solutions to Chapter 15 In‐class Problems 3 P15-11 Admission of a Partner a. Wayne purchases one-half of Merina's investment for $90,000: Merina, Capital 80,000 Wayne, Capital 80,000 b. Wayne invests amount for one-third interest; no goodwill or bonus: 2/3 Total resulting capital $ 360,000 Total resulting capital ($360,000 / 2/3) $ 540,000 Amount to be invested by Wayne ($540,000 x 1/3) $ 180,000 Cash 180,000 Wayne, Capital 180,000 d. Wayne invests $100,000 for a one-fourth interest; some inventory is
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This note was uploaded on 05/01/2010 for the course MGMT 503 taught by Professor Staff during the Spring '08 term at Purdue.

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Chap015_Classproblems_solu - Solutions to Chapter 15...

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