Question

please show all calculations for the 2nd question

Jordan, Pipen and Kerr are partners with capital balances of $75,000, $126,000, and *01,500, respectively on January 26, 2019. All nominal accounts have been adjusted and Closed as of January 26, 2019. The partners share profits and losses according to the Tollowing percentages: 35% for Jordan, 40% for Pipen and 25% for Kerr. On January 26, 2019, Rodman is to join the partnership upon contributing $67,500 in cash and some equipment with a book value of $14,500 and a fair value of $16,500 to the partnership, in exchange for a 20% interest in capital and a 20% interest in profits and losses. The existing assets of the original partnership are undervalued by $42.600, of which $31.500 relates to land and $11,100 relates to inventory. If necessary, the partnership will recognize goodwill. The original partners will share the balance of profits and losses in proportion to their original percentages. 1. REQUIRED: Prepare the journal entries necessary to record the above events. 2. February 21, 2019, the partnership suffered a hurricane loss of $180,000. The partnership insurance policy includes a 15% deductible. How must of this loss should be absorbed by each partner.

Answer 1

LF Credit $ Debit $ 31500 11100 42600 42600 1.JOURNAL ENTRIES SNo. Date Particulars 1 26-01-2019 Land a/c dr Inventory a/c To Profit and loss a/c (Being undervalued assets revauled and profit on revaluation recognised) 2 26-01-2019 Profit and loss a/c dr To Jordan capital a/c To Pipen capital a/c To Kerr capital a/c (Being profits on revaluation distributed in their old profit sharing ratio) 3 26-01-2019 Cash a/c Equipment a/c To Rodman capital a/c (Being capital contribution made by Rodman cash and equipment at book value $14500) 14910 17040 10650 67500 14500 82000

2 Calculation of Loss from Hurricane to be absorbed by each partner a. Calculation Loss from Hurricane = Totall Loss from Hurricane-Insurane amount = 180000-(180000 x 85%) or 180000 x 15% = 2700 (Deductible means 15% of loss portion is deducted from loss before calculation of Insurance Claim) b. Calculation of New Profit Sharing Ratio of Partners Old Profit Sharing ratio of partners is Jordan: Pipen : Kerr = 35% : 40% : 25% new profit sharing ratios of partners are = old profit sharing ratios-sacrificing ratio Jordan = 35%-(35% of 20%) = 28% Pipen = 40%-(40% of 20%) = 32% Kerr =25%-25% of 20%) = 20% Rodman -20% (Given in the question) c. Loss absorbed by each partner Since hurricane occurred after the admission of new partner losses shal be shared in new profit sharing ratio) Jordan - 2700 x 28% = 756 Pipen = 2700 x 32% = 864 Kerr = 2700 x 20% = 540 Rodman = 2700 x 20% 540 If total Hurricane amount is to be absorbed then Jordan - 180,000 x 28% = 50,400 Pipen = 180,000 x 32% : 57,600 Kerr = 180,000 x 20% = 36,000 Rodman = 180,000 x 20% 36,000

In case of insurance with deductable , only the amount to the exteant of deductable is regarded as loss beacuse for the balance amount insurance can be claimed