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ACCT521_Advanced Accounting

Project 1_Partnership

General Instruction:

For both of the following: a). Based on your answer, go to D2L to answer the project-related questions

under Quizzes. AND b). Submit your Statements through D2L assignment. The reason for me to ask you to

submit your work beside quizzes is to screen out free-riders, to make sure no one’s paper work looks very

similar to that of others.

1. Rick, Mary, and Joe formed a partnership on January 1, 2017, with investments of $100,000, $150,000, and

$200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital

balance each year, (2) annual compensation of $10,000 to Mary, and (3) sharing the remainder of the

income or loss in a ratio of 20% for Rick, and 40% each for Mary and Joe. Net income was $150,000 in

2017 and $180,000 in 2018. Each partner withdrew $1,000 for personal use every month during 2017 and

2018.

Instruction: Please prepare the Statement of Partners’ Capital Balances for 2017 & 2018.

2. The capital balances of the DEF Partnership are as follows:

Danielson $180,000

Eklund 95,000

Forsberg 150,000

Total $425,000

The partners’ income sharing ratio is: Danielson, 25%; Eklund, 45%; Forsberg, 30%. Assume the partnership’s

identifiable net assets are carried at amounts approximating fair value.

Case A:

Assume Gustafson joins the partnership by contributing $125,000 to the partnership for a 20% interest in

partnership capital.

Case B:

Now assume Gustafson paid ,000 for a 20% interest in partnership capital.

Instruction: For each case (each case is independent), please use both Bonus method and Goodwill method to

analyze the problem. Prepare the Statement of Partners’ Capital Balances, as well as the related journals prepared

for the partnership.