Problem

1. Shi purchased an interest in the Ton and Olg partnership by paying Ton $40,000 for half...

1. Shi purchased an interest in the Ton and Olg partnership by paying Ton $40,000 for half of his capital and half of his 50 percent profit-sharing interest. At the time, Ton’s capital balance was $30,000 and Olg’s capital balance was $70,000. Shi should receive a credit to her capital account of:

a $15,000

b $20,000

c $25,000

d $33,333


2. Lin and Que are partners with capital balances of $50,000 and $70,000, respectively, and they share profits and losses equally. The partners agree to take Dun into the partnership for a 40 percent interest in capital and profits, while Lin and Que each retain a 30 percent interest. Dun pays $60,000 cash directly to Lin and Que for his 40 percent interest, and goodwill implied by Dun’s payment is recognized on the partnership books. If Lin and Que transfer equal amounts of capital to Dun, the capital balances after Dun’s admittance will be:

a Lin, $35,000; Que, $55,000; Dun, $60,000

b Lin, $45,000; Que, $45,000; Dun, $60,000

c Lin, $36,000; Que, $36,000; Dun, $48,000

d Lin, $26,000; Que, $46,000; Dun, $48,000

Use the following information in answering questions 3 and 4:

McC and New are partners with capital balances of $70,000 and $50,000, respectively, and they share profit

and losses equally. Oak is admitted to the partnership with a contribution to the partnership of $50,000 cash

for a one-third interest in the partnership capital and in future profits and losses.


3. If the goodwill is recognized in accounting for the admission of Oak, what amount of goodwill will be recorded?

a $60,000

b $20,000

c $10,000

d $6,667


4. If no goodwill is recognized, the capital balances of McC and New immediately after the admission of Oak will be:

a McC, $65,000; New, $45,000

b McC, $66,667; New, $46,666

c McC, $67,500; New, $47,500

d McC, $70,000; New, $50,000


5. The December 31, 2011, balance sheet of the Ben, Car, and Das partnership is summarized as follows:

Cash

$100,000

Car loan

$100,000

Other assets, at cost

500,000

Ben capital

100,000

 

 

Car capital

200,000

 

 

Das capital

200,000

 

$600,000

 

$600,000

The partners share profits and losses as follows: Ben, 20 percent; Car 30 percent; and Das, 50 percent. Car is retiring from the partnership, and the partners have agreed that “other assets” should be adjusted to their fair value of $600,000 at December 31, 2011. They further agree that Car will receive $244,000 cash for his partnership interest exclusive of his loan, which is to be paid in full, and that no goodwill implied by Car’s payment will be recorded.

After Car’s retirement, the capital balances of Ben and Das, respectively, will be:

a $116,000 and $240,000

b $101,714 and $254,286

c $100,000 and $200,000

d $73,143 and $182,857

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Solutions For Problems in Chapter 16