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ysjd.patel
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Posted: 02 May 2010 at 15:48 \| IP Logged

Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel

contributed $100,000 and Carr contributed $84,000 in identifiable assets. Under the bonus approach to

adjust the capital accounts, Carr's unidentifiable asset should be debited for:

a. $46,000

b. $16,000

c. $8,000

d. $0

Can anyone explain me how?

ysjd.patel
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Posted: 02 May 2010 at 16:02 \| IP Logged

One one ques:

The partnership agreement of Reid and Simm provides that interest at 10% per year is to be credited to

each partner on the basis of weighted-average capital balances. A summary of Simm's capital account

for the year ended December 31, 1990, is as follows:

Balance, January 1 $140,000

Additional investment, July 1 40,000

Withdrawal, August 1 (15,000)

Balance, December 31 165,000

What amount of interest should be credited to Simm's capital account for 1990?

a. $15,250

b. $15,375

c. $16,500

d. $17,250

how to get this answer?

Alex2008
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Posted: 02 May 2010 at 16:50 \| IP Logged

Answer to problem one.

With the bonus approach unidentifiable assets do not constitute a partnership asset. So the total assets are $184,000 and the capital accounts are $92,000 to both: Abel and Carr.

The journal entry will be:

Assets (whatever they are) 184,000

    Carr Capital Account          ; ; 92,000
    Abel Capital Account          ; ; 92,000

In this problem the answer is D because there is not a debit for the unidentified assets.

Another story would be if the problem ask for the goodwill method. The goodwill method assumes that the unidentifiable assets constitute a partnership asset, goodwill. A possible answer for this problem can be:

Assets (whatever they are) 184,000
Goodwill    16,000

    Carr Capital Account          ; ; 100,000
    Abel Capital Account          ; ; 100,000

Alex2008
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Posted: 02 May 2010 at 16:57 \| IP Logged

Answer to problem two.

Beginning balance= 140,000 * 6 months/12 = 70,000

Additional Investment July= 140,000 + 40,000 * one month/12= 15,000

Withdrawal August= 180,000 - 15,000 * five months/12= 68,750

Total = 153,750

Interest= 153,750 *.10 = $15,375

ysjd.patel
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Posted: 02 May 2010 at 18:22 \| IP Logged

thanx alex2008 ...

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