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Miller and Davis, partners in a consulting business, share profits and losses in the ratio of 3:2, respectively.
Miller and Davis, partners in a consulting business, share profits and losses in the ratio of 3:2, respectively. Prior to recording the admission of Shaw as a new partner, Miller has a capital balance of $80,000, and Davis has a capital balance of $40,000.Required:For each of the following independent cases, prepare the journal entry that was made to record the admission of Shaw into the partnership.1) Shaw purchased 20 percent of the respective capital balances of Miller and Davis, paying $20,000 cash directly to each of them.2) Shaw invested $30,000 cash in the partnership for a 20 percent ownership interest. Total capital after recording his admission was $150,000.3) Shaw invested $40,000 cash into the partnership for a 20 percent ownership interest. Total capital after recording his admission was $160,000.4) Shaw invested $50,000 into the partnership for a 20 percent interest. Goodwill is to be recognized. A personal statement of financial condition dated December 31, 2008, is to be prepared for Wilhelm Holz. He provides the following information for your use in preparing the statements. All amounts are as of December 31, 2008.1) Cash on hand and in bank is $4,000.2) Investments costing $30,000 have a market value of $78,000.3) His personal residence cost $150,000 ten years ago, and is currently worth $320,000.4) The payoff balance of his home mortgage is $80,000.5) The fair value of his 401(k) retirement account is $700,000. All withdrawals from the account will be fully taxable.6) Amounts due on credit card debt total $5,000.7) Estimated income taxes on his calendar 2008 earnings amount to $15,000. Taxes withheld in 2008 were $14,000.8) Assume an income tax rate of 30 percent.Required: Prepare a statement of financial condition for Mr. Holz as of December 31, 2008. Assume any gain on subsequent sale of the residence will not be tax-exempt.The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated.Required:Prepare a cash distribution plan as of September 30, 2009, showing how much cash each partner will receive if the offer to sell the assets is accepted.
