PROBLEM 1 FACT PATTERN The net asset of ABC Co

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PROBLEM 1

FACT PATTERN

The net asset of ABC Co. consist of the following : A(20%),100,000 B(30%), 150,000 C(50%),200,000.The net assets are fairly valued.

Use the fact pattern above to answer the eight independent cases below:

1). D acquires half of the C's capital interest for 120,000

REQUIREMENT:

Provide the journal entry

2). D acquires 25% of A's B's and C's capital interests for 150,000

REQUIREMENTS:

A. Provide the journal entry

B. How much are the capital balances of the partners after the admission of C?

C. How much is the gain or loss to be recognized in the partnership's books?

D. How will A,B and C divide the 150,000 payment of D and how much are the personal gains(losses) of A, B and C?

3). (Ignore the previous assumption regarding the net assets being fairly valued.) D acquires 25% of A's, B's and C's capital interest for 150,000. The carrying amount of the partnerships assets as of this date approximates fair value except for equipment with carrying amount 680,000 and fair value of 830,000.

REQUIREMENTS:

A. Provide the journal entries

B. Determine the capital balances of the partners after the admission of D

4). (Use fact pattern above) D invests 112,500 for a 20% interest in the net assets and profits of the partnership.

REQUIREMENT:

Provide the journal entry

5). D invests 180,000 cash for a 20% interest in the net assets and profits of the partnership. The partners use the bonus method.

REQUIREMENT:

A, Provide the journal entry to record D's admission

B. Compute for the partners respective capital balances after D's admission

C. Compute for the revised profit and loss sharing ratio of the partners after D's admission

6). D invests 100,000 cash for aa 20% interest in the net assets and profit of the partnership. The partners use the bonus method .

REQUIREMENT:

A, Provide the entry to record the admission of D

B. Compute for the capital balances of the partners after D's admission

7). (Ignore the previous assumption regarding the net assets approximating fair value). D notifies A, B and C that he wants to invest for a one-fourth(1/4) interest in the partnerships net assets and profit. The carrying amount of the net assets approximates fair value except for land stated its acquisition cost of 200,000 but has a fair value of 500,000

REQUIREMENT:

If no bonus shall be allowed, how much should D invest in the partnership?

8). (Use fact pattern above) D invests equipment with a historical cost 200,000, and fair value of 160,000, for a 20% interest in the net assets and profits of the partnership. The partners use the bonus method.

REQUIREMENT:

Compute for the capital balances of the partners after D's admission

FACT PATTERN

The net assets of ABC Co. as of June 30,20x1 consist of the following : A(20%),300,000 B(30%),500,000 C(50%),200,000. Profit of 1,800,000 for the six months ended June 30,20x1 is not yet closed to the partners respective capital accounts. The net assets approximate fair values.

USE THE FACT PATTERN ABOVE TO ANSWER THEINDEPENDENT CASES BELOW:

9). On July 1,20x1, C sold his partnership interest to A and B for 1,240,000. A and B share proportionately in C's interest.

REQUIREMENT:

A. Provide the journal entry to record the withdrawal of C.

B. Compute for the capital balances of A and B after the withdrawal of C

C. Compute for the effect of C's withdrawal on the total partnership capital

10). C retires on July 1,20x1. The partnership pays C 1,240,000 as settlement of his interest

REQUIREMENT:

A. Provide the journal entry to record the withdrawal of C

B. Compute for the capital balances after C' s withdrawal

C. Compute for the effect of C's withdrawal on the total partnership capital.

11). C retires on July 1,20x1 and receives cash of 1,000,000 and equipment with carrying amount of 200,000 and fair value of 600,000 as settlement of his interest.

REQUIREMET:

Compute for the capital balances after C's retirement

PROBLEM 2: TRUE OR FALSE and explain the answer.

1. Technically, dissolution is the same as liquidation.
2. Partnership dissolution need not to be recorded in the partnership books.
3. The admission of a new partner dissolves the original partnership agreement
4. The admission of a new partner always increases the partnership capital
5. The disassociation of a partner from the partnership always decreases partnership capital.

FACT PATTERN:

You and I partners with capital balances of 5 each. We have equal interest in the partnership.

1. Friend acquires one-half of your interest for 3. Your capital balance after the admission of friend is 2.5
2. The payment of friend is recorded in the partnerships book
3. The total partnership capital after the admission of friend is 13.
4. Disregard the previous assumptions. Friends acquires 20% interest investing 5 to the partnership. Under the bonus method ,friends initial capital credit is 3
5. The investment of friend is recorded in the partnerships books.