Question

Question 3) Trumming and Nancy are successful partners. They share profits and losses equally. Their current capital account balances are $20 and $10 respectively. They decide to admit Tyler to the partnership.

Tyler invests $25 for a 20 per cent share of the partnership. The journal entry to admit Tyler will include:

1. debit Trumming, capital $11.00

2. debit Nancy, capital $9.75

3. credit Trumming, capital $9.75
   
4. credit Nancy, capital $7.00

Question 4) A machine with a cost of $90 000 has an estimated residual value of $30 000 and an estimated life of four years or 20 000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5 500 hours?

1. $20,000

2. $16,500

3. $30,000

4. $22,500

Answer 1

Question 3 Capital Before admission of new partner - 20+10 - 30 New Partnerſtyler) Bringing capital = 25 Total Capital after admission = $55 Tyler share Tyler capital - 55*20% 20% $ 11.00 Tyler Invested $25 in return for a capital allocation of $11 Difference will be treated as Bonus Bonus = $25 - $11 $ 14.00 The Bonus is allocated to Existing Partners in their profit share ratio. Profit sharing ratio = 1:1 Equal Share of Bonus for Trumming : $14*1/2 Share of Bonus for Nancy : $14*1/2 $ 7.00 S 7.00 Option (D) is Correct - Credit Nancy Capital $7.00

Requirement 4 Units of Production Cost Less : Salvage Value Depreciable value (A) 90,000.00 (30,000.00) 60,000.00 Estimated Productive life (B) Depreciation per UNit (A/B) 20000 Hours 3.00 Hours Depreciation per Unit 5500.00 $ Depreciation Expense 3.00 $ 16,500.00 Depreciation for year 2 Option B is Correct