Brian Snow and Wendy Waite formed a partnership on July 1, 2007

P15.8 Comprehensive Partnership Problem

Brian Snow and Wendy Waite formed a partnership on July 1, 2007. Brian invested $20,000 cash, inventory valued at $15,000, and equipment valued at $67,000. Wendy invested $50,000 cash, and land valued at $120,000. The partnership assumed the $40,000 mortgage on the land.
On June 30, 2008, the partnership reported a net loss of $24,000. The partnership contract specified that income and losses were to be allocated by allowing 10% interest on the original capital investment, salaries of $15,000 to Brian and $20,000 to Wendy, and the remainder to be divided in the ratio of 40:60.
On July 1, 2008, Alan Young was admitted into the partnership with a $70,000 cash investment. Alan was given a 30% interest in the partnership because of his special skills. The partners elect to use the bonus method to record the admission. Any bonus should be divided in the old ratio of 40:60.
On June 30, 2009, the partnership reported a net income of $150,000. The new parntership contract stipulated that income and losses were to be divided in a fixed ratio of 20:50:30.
On July 2, 2009, Brian withdrew from the partnership for personal reasons. Brian was given $40,000 cash and a $60,000 note for his capital interest.

Required:
Prepare journal entries for each of the following events. Show computations.
1. Formation of the partnership.
2. Distribution of the net loss for the first year.
3. Admission of Alan into the partnership.
4. Distribution of the net income for the second year.
5. Withdrawal of Brian from the partnership.

Click here for the solution: Brian Snow and Wendy Waite formed a partnership on July 1, 2007

Pronto Plumbing Company is a newly formed company specializing in plumbing services for home and business

ACC 560 Week 6 Assignment

E10-9 Pronto Plumbing Company is a newly formed company specializing in plumbing services for home and business. The owner, Paul Pronto, had divided the company into two segments: Home Plumbing Services and Business Plumbing Services. Each segment is run by its own supervisor, while basic selling and administrative services are shared by both segments.
Paul has asked you to help him create a performance reporting system that will allow him to measure each segment's performance in terms of its profitability. To that end, the following information has been collected on the Home Plumbing Services segment for the first quarter of 2008.

Budgeted Actual
Service revenue $25,000 $26,000
Allocated portion of:
Building depreciation 11,000 11,000
Advertising 5,000 4,200
Billing 3,500 3,000
Property taxes 1,200 1,000
Material and supplies 1,500 1,200
Supervisory salaries 9,000 9,400
Insurance 4,000 3,500
Wages 3,000 3,300
Gas and oil 2,700 3,400
Equipment depreciation 1,600 1,300

Instructions
a) Prepare a responsibility report for the first quarter of 2008 for the Home Plumbing Services segment.
b) Write a memo to Paul Pronto discussing the principles that should be used when preparing performance reports.

Click here for the solution: Pronto Plumbing Company is a newly formed company specializing in plumbing services for home and business

Rye Company was formed on December 1, 2010

Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $2,500 at the end of each year and provides the lesser (John) with an 8% return on its investment. You may use the following 8% interest factors:

Future value of 1 1.99900 2.15892 2.33164
Present value of 1 .50025 .46319 .42888
Future value of ordinary annuity of 1 12.48756 14.48656 16.64549
Present value of ordinary annuity of 1 6.24689 6.71008 7.13896
Present value of annuity due of 1 6.74664 7.24689 7.71008

a) Assume the computer has an eleven-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?

b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?


Click here for the solution: Rye Company was formed on December 1, 2010

Abercrombe Co., a U.S. firm, formed a German company in 20X4 by purchasing the common stock of the newly formed Dolce Inc

Abercrombe Co., a U.S. firm, formed a German company in 20X4 by purchasing the common stock of the newly formed Dolce Inc. The functional currency of Dolce is the euro. During their first three years, Dolce experienced the following activity in retained earnings:

20X4 Net loss 100,000 euros
20X5 Net income 200,000 euros
January 1, 20X6 Dividend 50,000 euros
20X6 Net income 75,000 euros

The following exchange rates could be relevant:

Date 1 euro equal to

December 31, 20X3 $0.20
December 31, 20X4 $0.22
Average 20X4 $0.215
January 1, 20X6 $0.245
Average 20X5 $0.24
December 31, 20X6 $0.26
Average 20X6 $0.25

Required: What is the translated December 31, 20X6, balance of the retained earnings for Dolce?


Click here for the solution: Abercrombe Co., a U.S. firm, formed a German company in 20X4 by purchasing the common stock of the newly formed Dolce Inc

Permtemp Corporation formed in 2008 and, for that year, reported the following book income statement and balance sheet

C:3-65 Permtemp Corporation formed in 2008 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:

AND SO ON

Required for 2008:
a. Prepare page 1 of the 2008 Form 1120, computing the corporations NOL.
b. Determine the corporations deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2008 Form 1120.
c. Prepare the 2008 Schedule M-3 for Form 1120.
d. Prepare a schedule that reconciles the corporations effective tax rate to the statutory 34% tax rate.

Check Figures for Project:

2008 - Form 1120, line 30 taxable income has a net operating loss of ($887,500). Schedule L has lines 15 and 28 of $16,920,750. Schedule M-2 has a line 8 balance at the end of the year of negative ($393,250). The problem does not tell you to do the M-2 but I want you try it. M-3 line 4a should be $negative ($393,250), Part II, line 26 negative ($14,950,000), line 30 negative ($852,500) and Part III, line 30 $2,047,500 in column (d).

2009 - Form 1120, line 30 taxable income of $1,836,760. Remember that you had a net operating loss in 2008 and you should have special deductions. Line 31 total tax should be $624,498. Schedule L should have a rollover beginning balance from the 2008 ending balance above and the 2009 ending balance should be $20,578,000. Schedule M-2 should have a line 8 number of $2,568,502. Schedule M-3 should have a line 4a of $2,961,752, Part II, line 26 of negative ($21,945,000), line 30 of $2,762,760, and Part III, line 36 of $3,617,240 in column (d).


Click here for the solution: Permtemp Corporation formed in 2008 and, for that year, reported the following book income statement and balance sheet

(Comprehensive Problem 1 Susquehanna Equipment Rentals) On December 1, 2011, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals

Comprehensive Problem 1 Susquehanna Equipment Rentals

Susquehanna Equipment Rentals, 16th Edition

A COMPREHENSIVE ACCOUNTING CYCLE PROBLEM

On December 1, 2011, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-It, an equipment rental company that was going out of business. The newly formed company uses the following accounts:

AND SO ON

The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions:

Dec. 1- Issued to John and Patty Driver 20,000 shares of capital stock in exchange for a total of $200,000 cash.

AND SO ON

g. Would it be ethical for Patty Driver to maintain the accounting records for this company, or must they be maintained by someone who is independent of the organization?

Click here for the solution: (Comprehensive Problem 1 Susquehanna Equipment Rentals) On December 1, 2011, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals

The Heron Partnership was formed on July 1 of the current year and admitted Carl and Megan as equal partners on that date

The Heron Partnership was formed on July 1 of the current year and admitted Carl and Megan as equal partners on that date. The partners each contributed $ 200,000 of cash to establish a children’s clothing store in a local shopping mall. The partners spent July and August buying inventory, equipment, supplies, and advertising for their "Grand Opening" on October 1. Following are some of the costs the partnership incurred during its first year of operations:

Legal fees to form partnership 2,000
Advertising for "Grand Opening" 15,000
Advertising after opening 10,000
Consulting fees for establishing accounting system 5,000
Rent, six months at $ 2,000/ month 12,000
Utilities at $ 600 per month 3 3,600
Salaries to sales clerks 30,000
Payments to Carl and Megan for services ($ 5,000/ month each for three months, beginning in October) 30,000
Tax return preparation expense 5,000

In addition, the partnership purchased all of the assets of Granny Newcombs, Inc. Of the total purchase price for these assets, $ 60,000 was allocated to the trade name and logo.

Determine how each of the above costs is treated by the partnership, and identify the period over which the costs can be deducted, if any.

Click here for the solution: The Heron Partnership was formed on July 1 of the current year and admitted Carl and Megan as equal partners on that date

Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment

E10-5 (Treatment of Various Costs) Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.

Abstract company’s fee for title search $ 520
Architect’s fees 3,170
Cash paid for land and dilapidated building thereon 92,000
Removal of old building $20,000
Less: Salvage 5,500 14,500
Interest on short-term loans during construction 7,400
Excavation before construction for basement 19,000
Machinery purchased (subject to 2% cash discount, which was not taken) 65,000
Freight on machinery purchased 1,340
Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180
New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000
Assessment by city for drainage project 1,600
Hauling charges for delivery of machinery from storage to new building 620
Installation of machinery 2,000
Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400

Instructions
Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded.

Click here for the solution: Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment

Gabelli Corporation was formed on January 1, 2012

P1-5A Gabelli Corporation was formed on January 1, 2012. At December 31, 2012, John Paulus, the president and sole stockholder, decided to prepare a balance sheet, which appeared as follows.

GABELLI CORPORATION
Balance Sheet
December 31, 2012
Assets Liabilities and Stockholders’ Equity
Cash $20,000 Accounts payable $30,000
Accounts receivable 50,000 Notes payable 15,000
Inventory 36,000 Boat loan 22,000
Boat 24,000 Stockholders’ equity 64,000

John willingly admits that he is not an accountant by training. He is concerned that his balance sheet might not be correct. He has provided you with the following additional information.
1. The boat actually belongs to Paulus, not to Gabelli Corporation. However, because he thinks he might take customers out on the boat occasionally, he decided to list it as an asset of the company. To be consistent, he also listed as a liability of the corporation his personal loan that he took out at the bank to buy the boat.
2. The inventory was originally purchased for $25,000, but due to a surge in demand John now thinks he could sell it for $36,000. He thought it would be best to record it at $36,000.
3. Included in the accounts receivable balance is $10,000 that John loaned to his brother 5 years ago. John included this in the receivables of Gabelli Corporation so he wouldn’t forget that his brother owes him money.

Instructions
(a) Comment on the proper accounting treatment of the three items above.
(b) Provide a corrected balance sheet for Gabelli Corporation. (Hint: To get the balance sheet to balance, adjust stockholders’ equity.)

Click here for the solution: Gabelli Corporation was formed on January 1, 2012

Riviera Theater Inc. was recently formed. All facilities were completed on March 31

P3-8B Riviera Theater Inc. was recently formed. All facilities were completed on March 31. On April 1, the ledger showed: Cash $6,300; Land $10,000; Buildings (concession stand, projection room, ticket booth, and screen) $8,000; Equipment $6,000; Accounts Payable $2,300; Mortgage Payable $8,000; and Common Stock $20,000. During April, the following events and transactions occurred.

Apr. 2 Paid film rental fee of $800 on first movie.
3 Ordered two additional films at $750 each.
9 Received $4,700 cash from admissions.
10 Paid $2,000 of mortgage payable and $1,200 of accounts payable.
11 Hired M. Gavin to operate the concession stand. Gavin agrees to pay Riviera Theater 17% of gross receipts, payable monthly.
12 Paid advertising expenses $410.
20 Received one of the films ordered on April 3 and was billed $750. The film will be shown in April.
25 Received $3,000 cash from customers for admissions.
29 Paid salaries $1,900.
30 Received statement from M. Gavin showing gross receipts of $2,000 and the balance due to Riviera Theater of $340 for April. Gavin paid half of the balance due and will remit the remainder on May 5.
30 Prepaid $1,200 rental fee on special film to be run in May.

In addition to the accounts identified above, the chart of accounts shows: Accounts Receivable, Prepaid Rent, Service Revenue, Sales Revenue, Advertising Expense, Rent Expense, Salaries and Wages Expense.

Instructions
(a) Enter the beginning balances in the ledger T accounts as of April 1.
(b) Journalize the April transactions, including explanations. (Note: Riviera records admission revenue as service revenue, concession revenue as sales revenue, and film rental expense as rent expense.)
(c) Post the April journal entries to the ledger T accounts.
(d) Prepare a trial balance on April 30, 2012.

Click here for the solution: Riviera Theater Inc. was recently formed. All facilities were completed on March 31

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June, and that 425,000 chips were completed.

Ending inventory was 50% complete as to conversion costs.

Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending inventory.

Click here for the solution: The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation