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Chapter 12

Accounting for Partnerships
QUESTIONS
1.

Under the circumstances described, the death, bankruptcy, or legal inability of a
partner to execute a contract ends a partnership. In addition, if a partnership is
organized for the purpose of completing a specific business project, the partnership
ends when the project is completed. If the business for which the partnership was
organized cannot be completed, but goes on indefinitely, the partnership may be
dissolved at the will of any one of its partners.

2.

Mutual agency means that each partner is an agent of the partnership and can
commit it to contracts that are within the normal scope of its business.

3.

Yes, partners can limit the right of a partner. Such an agreement is binding on
members of the partnership. It is also binding on outsiders who know of the
agreement. However, it is not binding on outsiders who do not know of the
agreement.

4.

No, he does not have this right. A partnership is a voluntary association and
partners have the right to select the people with whom they associate as partners.

5.

If partners agree on the method of sharing incomes, but say nothing of losses, then
any losses are shared in the same manner as income.

6.

The allocation of net income to the partners is reported on the statement of partners'
equity.

7.

Unlimited liability means that the creditors of a partnership have the right to require
each partner to be personally responsible for all debts of the partnership.

8.

All partners in a general partnership have unlimited liability. A limited partnership
includes both general and limited partners, and the limited partners have no
personal liability for partnership debts. Also, the general partners assume the
management duties of the partnership.

9.

George's claim is not valid unless the previously agreed upon method of sharing net
incomes and losses granted George an annual salary allowance of $25,000. Unless
the partnership agreement says otherwise, partners have no claim to a salary
allowance in payment for their services.

10. No. Kay is still liable to her former partners for her share of the losses.

©McGraw-Hill Companies, 2007
Solutions Manual, Chapter 12

139

11. At all times in the accounting history of a partnership (or any organization), assets
must equal liabilities plus equity. When the assets are converted to cash, any gains
or losses are allocated to the capital accounts of the partners; and when creditors'
claims are paid, assets and liabilities are reduced by equal amounts. Therefore,
when the remaining assets are in the form of cash, the amount of cash must equal
the claims (equity) of the partners.
12. The remaining partners should share the decline in their equities in accordance with
their income-and-loss-sharing ratio.

QUICK STUDIES
Quick Study 12-1 (10 minutes)
a. The partnership will need to pay because it is a merchandising firm.
That is, if the vendor knows nothing to the contrary, the vendor can
assume that Leon has the right, because of mutual agency, to bind the
firm to contracts for the purchase of merchandise.
b. A public accounting firm is not in the merchandising business.
Consequently, because the purchase of merchandise to be sold is not
within the normal scope of the business of this firm, the vendor has no
right to assume Leon is acting as the agent for the partnership. Hence,
the partnership probably will not have to pay.
Quick Study 12-2 (15 minutes)
Stolton
Net income.........................................
Salary allowances
Stolton..............................................
Bright...............................................
Total salary allowances..................
Balance of income............................
Balance allocated equally
Stolton..............................................
Bright................................................
Total allocated equally...................
Balance of income............................
Shares of the partners.....................

Bright

Total
52,000

$15,000
$20,000
35,000
17,000
8,500
8,500
______
$23,500

______
$28,500

17,000
$
0

©McGraw-Hill Companies, 2007
140

Fundamental Accounting Principles, 18th Edition

..........Quick Study 12-3 (10 minutes) If Blake is allocated a $100... Quick Study 12-7 (15 minutes) Total partnership return on equity = Net Income/Average equity = $25..000 To record admission of Kwon.......... Quick Study 12-6 (10 minutes) Cash Kwon. Amal....000 = 9.........................................000 + $60..000)/2 = $25..................... 40............000 / $120...000 / ($100... Quick Study 12-5 (10 minutes) Choi..... then this shows that the partnership must have earned net income of $104.. Quick Study 12-4 (10 minutes) Since Mourlan is a limited partner....000 / ($150......000 10................... 2007 Solutions Manual...000)/2 = $20...........000 = 16....000 + $140......000.. Capital.... giving Matthai $2...........000 / $175........000 / ($50...1% ©McGraw-Hill Companies.. Stein..........................000 salary allowance and there remains $4......000 40....000 / $55. Therefore......000.................000 20..000 To record admission of Stein by purchase................000 to be divided equally.000 = 14......... Capital.......... Chapter 12 141 . he is not personally liable for any unpaid debts of the partnership..000 + $200. Capital.... 10.. the partnership’s creditors cannot pursue Mourlan’s personal assets....3% Howe partner return on equity = Partner net income/Average partner equity = $20....7% Duley partner return on equity = Partner net income/Average partner equity = $5.000)/2 = $5...... Capital...

Owners’ authority Mutual agency 6. 2007 142 Fundamental Accounting Principles. Transferability of ownership Difficult to transfer 8. 18th Edition . Tax status of income Taxed only once 5. Ease of formation Requires only an agreement 7. Owners’ liability Unlimited 3.EXERCISES Exercise 12-1 (15 minutes) Characteristic General Partnerships 1. Life Limited 2. Ability to raise large amounts of capital Low ability ©McGraw-Hill Companies. Legal status Not separate from partners 4.

but at a much lower level. Therefore. Advantages: Several key advantages to the corporate form include its limited liability and the potential to sell more stock if additional funds are needed. any income will be subject to corporate income tax. They can structure the financing so that they remain the major stockholders in the company. Recommended Organization: Sharif. Given his real estate expertise. He can raise the necessary capital by admitting limited partners. 2007 Solutions Manual. Taxation: As a corporation.Exercise 12-2 (20 minutes) a. Recommended Organization: The two doctors should form a partnership. Advantages: The advantages of the partnership are ease of formation and owner authority. but the partnership entity will not pay income tax. Any salaries that Sharif. c. A general partnership will have the disadvantage of unlimited liability so they probably want to consider a limited liability partnership. and Korb pay themselves will be a tax-deductible expense for the business. However. The partnership can borrow funds from the bank to obtain the initial needed capital for the business. Chapter 12 143 . instead of a partnership. he can manage the day-to-day activities of the partnership and serve as its general partner. ©McGraw-Hill Companies. Taxation: The owners will pay individual taxes on income earned by the partnership but the partnership will not be taxed. Any dividends paid to the stockholders will also normally be taxed. Henry. a problem for these new graduates is that they do not have funds and with no past business experience will probably have trouble getting a business loan. a better course of action is probably to incorporate. Henry. b. In this way they might be able to find investors to contribute capital for stock. and Korb might first consider organizing their business as a general partnership. Taxation: All partners will pay individual taxes on income distributed to them. Moreover. some lower income taxpayers could potentially pay little or no dividend tax. Recommended Organization: Munson should consider setting up a limited partnership.

2007 144 Fundamental Accounting Principles.Advantages: The advantages to Milan will be the authority over the partnership that he will have as general partner and the ease of raising capital. 18th Edition . ©McGraw-Hill Companies.

.. Share of income*........................................................................................000 20........750 15....000 50..................000 25...............................................000 To close withdrawals accounts................. Total interest allowances................ 2008 Mar......................... 60............ Capital.................. Eckert $ 82.......................... 2007 Solutions Manual. Kelley...................* 2...........................Exercise 12-3 (25 minutes) 1a...... Balance of income........500).................. 1c..000 Long-Term Note Payable.......................................... 31 Income Summary.................... Balance allocated equally Eckert................................ 2008 Dec................... Capital.........500 (20. 31 Eckert............... Ending balances........ Eckert................................ Withdrawals......000 20. Withdrawals........... Capital..250 Total $90...500 To record initial capital investments..........000) 58....... 82.....................000 54..........000 Kelley Kelley $ 67.250 $106..........250 Kelley (10% on $67..... Capital...500 Land... $25.........000 Total salary allowance......... Balance of income..... 20 Eckert..............750 $ 79........................................500 82............ Kelley................................. Capital................ 8................................ Kelley...... 92....... 2008 Oct......................................000 $ 6............... Withdrawals...................000 Building.........000 To record partners’ withdrawals........750 To close Income Summary account..000 20.......... Cash.............750 *Supporting calculations Eckert Net income. Capital account balances Initial investment................................. 25............... 90................... Interest allowances Eckert (10% on $82.. Eckert.............................. 1 Cash................... 34......500 (34....... Withdrawals......... Withdrawals...500).......... 100.........250 31......... Dec.. Salary allowance Eckert............... Kelley..........000 34.... 34... 1b......500 67.000) 31......000 ©McGraw-Hill Companies.........000 58....... Chapter 12 145 ......................... Eckert.....000 65...... Capital. Kelley.............................

.............000 _______ 50.. _______ Shares of the partners. 18th Edition ..... $58.......750 ©McGraw-Hill Companies..............Kelley.............. 2007 146 Fundamental Accounting Principles................... Total allocated equally.......250 25......000 $ 0 $31.......... Balance of income..............

..................000 28........... Balance of income.. $80.......... ......000)/2..429 $91...... .........571 Plan (3) Net income......000 $91...... 2007 Solutions Manual....000 $76......000) x $160... $84...... Balance allocated equally ($56... ($80......000 8...000 x 10%).. ($80.. Interest allowances ($60....000..000/$140.......000 $40.000 28.... Shares of each partner......000 Plan (1) $160......000 90..........571 91..............000 8........000 $160... .... Chapter 12 147 .000 Plan (2) ($60..........000 6.000 56..000 $ 0 ©McGraw-Hill Companies.........000) x $160.000 $160..000 x 10%)....000... .. $50...000 104....429 $160.....000/$140.. Salary allowances............429 $ 68.000 6.... Balance of income.........000 x 1/2........000 56... $68....... Total salary and interest..... ..571 $68...Exercise 12-4 (30 minutes) Kramer Knox Total $80....000 ....

.................000 Interest allowances ($60.................... Capital. $ (4.... _______ Shares each partner..................600) _______ (5.................800) 120.......000 (60..........................000 104............................000 $ 98..........000 (2........ 100...........000 Interest allowances ($60................ $50.....................000 100..............000 x 10%)........ (2............ Net income......000 ($80.......200)/2........800 90. 6..................400) Knox Total $ 40..........000 (120........ 6.000 ($80......000 8...... Salary allowances...600) Balance of income...000 6...........000 8.............400) Balance of income... 18th Edition ..400 $ 40.. Total salaries and interest..000 6..................800)/2......... ©McGraw-Hill Companies........200) 8... 30 Mandy. _______ Shares of each partner.400) $ (16................800 $ 0 Exercise 12-6 (10 minutes) Sept..... $50...........000 (5.............. (60..... Balance of income.800) 90...... Remainder equally ($5... $53....... Net income........................................... Salary allowances........... Balance of income.200) $ 0 $ 45...000 x 10%)....Exercise 12-5 (35 minutes) Kramer 1. Remainder equally $(120....400 2..000 x 10%).................000 8....000 104.. Brittney.........400) _______ $(12.... Capital. 2007 148 Fundamental Accounting Principles...................000 x 10%)..............000 To record admission of Brittney........... Total salaries and interest........

.......................400 5............500 = $25.................. Nov. 1 Cash...................... 90.....500 x 80% = $20.000 + $80................... Capital.. Madison...................500 20.....000 + $90......500 $25...........100 To record admission of Madison...000 x 15% = $94.................. Main......................000 .. Capital........... Capital.. Madison............ 80.....................................................000) x 15%]... Nov. Capital.................................. Supporting computations $510. First.............Exercise 12-7 (25 minutes) 1....400 $25.....700) ©McGraw-Hill Companies...... 1 Cash..000 = $630.000 = $590.............. Capital.. First.........000 Madison.....................500) $(8....000 To record admission of Madison [($510...... 2007 Solutions Manual.............500 = $(8.....800) $(8... 120......000 $590..................500 $80.500) x 20% = $(1... Main............... 2. Capital....... Nov....000 $630.......$94............... 94....500 To record admission of Madison.......000 .................. 1 Cash............100 3.000 90.......... Capital.700 88.500 x 20% = $5....000 6.........000 + $120......500) x 80% = $(6......... Supporting computations $510..000 x 15% = $88..$88..800 1.500 $120.............. Chapter 12 149 .

..000 18.. 18th Edition ..000 60.. 31 Tulip..................... Flowers........... Jan............... Holland..500 80............ Capital.. Holland......................................000) ©McGraw-Hill Companies... Cash......... Capital*.................. * (5/8 x $20......000) 3................ 60.... * (5/8 x $30......... Flowers.... Capital...... 2007 150 Fundamental Accounting Principles.........Exercise 12-8 (15 minutes) 1........ Jan. Cash...... 31 Tulip......................................000) **(3/8 x $20............................... 2.000 To record retirement of Tulip.................. 60........ 31 Tulip.................................................. Cash.................250 30...........000 To record retirement of Tulip........ Jan.............................. 60..000) **(3/8 x $30.. Capital**.................... Capital**................................ Capital.......750 11..........................000 To record retirement of Tulip......... Capital*......500 7..................000 12...............

...............000 10............................. 50.000 10.000) $ 60.........000 To distribute remaining cash...... Blue....000 15.................000 (190........... 5........ 31 White.........000 To transfer deficiency to other partners......000 To record payment of deficiency... Capital balances. a) Aug.......Exercise 12-9 (30 minutes) 1......000) (190....$60...............................................................000)/3........ Blue......... Chapter 12 151 ..000 White $240... b) Aug....... Allocation of all losses ($630.................. ©McGraw-Hill Companies.. Red $180..............000 70.....000 2..... 10........000 5...........000 20........000 (190.. 2007 Solutions Manual.......................... 3.... Capital............ 31 White................... Cash....000) $ (10..... Cash....... Blue.............. Capital......... Capital........ Capital................000 (570...000) $ 50........................000 To distribute remaining cash..000) $ 20.................000 60..... Red.......................... Initial investments...............000 Blue $210............. 31 White................................................................ Capital.. 45.. a) Aug..... 31 Cash............... Capital.......... Capital................000 .. Red............000 Total $630.. b) Aug......... Capital.......

...............000 x 1/10..... ©McGraw-Hill Companies.............. Cash proceeds from sale of assets......000) $ 76......000) $(28.000 (28........000 ....000 x 5/10..500 $ 14........ Total liabilities (before liquidation).......000) (7...........Exercise 12-10 (30 minutes) a........ Loss allocation Capital balances before loss liquidation Allocation of loss $76.....000 = $78..... Loss on sale of assets*. $76...000 $78..500 $ 48... 2007 152 Fundamental Accounting Principles.... . 18th Edition .......600) ______ $(5...000 (30.$50..Cash received = $126. Loss from selling assets Total book value of assets.......400) _______ $(16..000) (50. Total liabilities remaining after paying proceeds of asset sales to creditors......000 $ 31..100) c.........400) (38.. Capital balances after loss...............000 ..... $126... Turner Roth Lowe Total $ 2...500) (76........000) 2) Loss on sale of assets = Book value of assets . Liability to be paid Each partner should pay the amount of the debit (deficit) balance in his or her own capital account...........000 * Alternative computation 1) $28...........Cash from assets’ sale (This implies cash from assets sale is $50.....000) $ (6........000 b....000 = $76....000 x 4/10.. $76...

.....................000 (7.000 x 1/10................000 liability........ Loss on sale of assets..500 Roth $ 14.......500) $(28...500 Total $ 48.....365....153......300) ______ (5.... $6... Loss from selling assets Total book value of assets...000 + $211....000 Lowe $ 31.......000 b..600) (38........ $126............... Lowe has no personal liability for the $28...... ...500 x 1/5........5% Soccer LP: Partner return on equity: $22.....000) (6.1% Football LP: Partner return on equity: $445..................000 x 4/10...000 (28...000 + $1. Turner and Roth must share the loss reflected in Lowe's capital account deficit as shown above.................400) _______ (16.............. Total liabilities remaining after paying proceeds of asset sales to creditors....032)/2] = 40.....000) (76.Exercise 12-11 (30 minutes) a....400) $(21..........000) (50....000) c.000) 6. Cash paid by each partner Turner $ 2..500 $ 0 _________ $(28...898 / [($758.. Therefore.....000 x 5/10........000 + $1. $76........898)/2] = 46.000) $ 76.000 $78......032 / [($947..600) ______ (5. Loss and deficit allocation Capital balances before loss Allocation of loss $76... Cash proceeds from sale of assets... Chapter 12 153 .. Liability to be paid As a limited partner... Total liabilities before liquidation....... Capital balances after loss. Allocation of Lowe's deficit to Turner and Roth $6.....134 / [($189....... Exercise 12-12 (20 minutes) Hunt Sports Enterprises LP: Return on equity: $468..................6% ©McGraw-Hill Companies... 2007 Solutions Manual......200) $(6.500 x 4/5......100) (30.134)/2] = 11...400) (1.. $76..

..................................... Capital... 2007 154 Fundamental Accounting Principles............. Capital....000) x $249................................000 0 ©McGraw-Hill Companies... 31 Income Summary..............200 ______ $97..................000 = $99.................... Balance allocated equally.000 5.000/$320.. 18th Edition ...................... Capital....... Capital..................600 3....... Bal........................ Capital.............. Balance of income.000/$320.............. Interest allowances Ries (10% on $80...........................000 8.150 ($128.......................... Josh Thomas....000 62... Dec......000 47... *Supporting computations ($80.... Balance after salary allowances.........000).......000 To close Income Summary....................000 83..250 ($112..........000) x $249........000/$320..... Dec............000 = $62...000) x $249..........200 97.................000 5................... Thomas............... 31 Income Summary....000 15....150 99... Total allocated equally.................. Salary allowances Ries..... Kim Ries.................PROBLEM SET A Problem 12-1A (50 minutes) 1............................. 2................000 $66.........000 $80.......... Total salaries.. *Supporting calculations Net income..000 ______ $72............000 72.............. 249....... Capital... Tere Bax...800 32...800 $ 15... 249....800 To close Income Summary*. Tere Bax.... Kim Ries......... Thomas (10% on $128............... 249.....000 5..... Total interest. Josh Thomas..000)....... Bax (10% on $112..............000 ______ $79.....600 To close Income Summary*.......... Bax.. Josh Thomas...... Shares of the partners.. Kim Ries......200 12.........000 11....... Capital................................ Capital...........000)....... Dec.. Ries Bax Thomas Total $249.......000 $56............... Tere Bax.000 79.................. Capital......000 202..250 87...............000 = $87.000 83........... after interest and salaries........ 31 Income Summary.............000 83...

.....000 loss.....200 Lyon= 10% x $63...........000 salary) Totals..800) $ 7.....000 loss..............................000/$105..........400) 33 1/3% x $36.5/1........ $ $ 72.....000 loss + $72... ...........600) $(24........000 Plan (d) Interest allowances Watts = 10% x $42.... ..200) (64...............200) $(43...000 loss + $72........250) (59..000 = $ 4....0/1........... 60% x $36........ Chapter 12 155 .....Problem 12-2A (45 minutes) Preliminary calculations Plan (a) & Plan (c) Percentages based on initial investments Watts = $42.....000 salary + $10.....050) $ 19..... Interest allowances.................300 Income (Loss) Sharing Plan (a) (b) (c) Year 1 Calculations 40% x $36.................. Totals....... (d) Watts $ 72.................200 ©McGraw-Hill Companies..............5 = 66 2/3% Plan (c) & Plan (d) Salary allowance Lyon= 12 x $6..... 2007 Solutions Manual.........000) Lyon $(21.....000) Salary allowance.000 = $ 6........ $(14......000 salary) 60% x ($36........................................000 = 40% Lyon = $63......000 $(43....... 40% x ($36.....250) $(55.... (59..200 Salary allowance........................................ 66 2/3% x $36...........050 ________ 4.000 = 60% Plan (b) Percentages based on time Watts = 0............000 6..000 loss + $72........................300 50% x ($36............. $(12...500 interest)...5 = 33 1/3% Lyon = 1.000 loss...........000/$105.....................000 = $72..000 loss.............

60% x $90.......... 2007 156 Fundamental Accounting Principles...800 $ 4................. Totals.750 $82...............000 $60............000 salary).......000 salary)................ 66 2/3% x $90.. 60% x $150...... 40% x ($150......750 $37................000 $31.800 $82... $36..000 6...................$72.........050 Watts Lyon _______ Year 3 Calculations 40% x $150...... Totals............................... .............................950 33....... Income (Loss) Sharing Plan (a) Year 2 Lyon $54................000 salary .. $ 90....000 $100............. 18th Edition ..........200 46..000 $ 72...$10.. Interest allowances...000 $ 7...750 $ 7............. 50% x ($150....... Interest allowances.......000 income......$72............000 salary ...................200 $ 72...000 income. 50% x ($90...........000 income ....$72.....000 income ...200 $72....Problem 12-2A (Concluded) Income (Loss) Sharing Plan (a) (b) (c) (d) (b) (c) (d) Calculations Watts 40% x $90...... Salary allowance......................$72............000 income......000 income.500 interest)..800 $ 4.......000 income.$72.......300 33....... 66 2/3% x $150..................................000 income.500 interest)...200 10.....200 $31............................050 _______ ©McGraw-Hill Companies.....200 $ 7.......$10........... 60% x ($90.. $30...................000 33 1/3% x $90........................... Totals.....000 salary)..000 income ..............000 salary)...... 60% x ($150............000 income .000 income ........750 $112.......................................000 income.....000 income ................. $60.....$72.000 Salary allowance.......000 33 1/3% x $150..........950 3..300 3.....000 income.......................... 40% x ($90........ $50......800 $118..000 $72..................000 6.................. Salary allowance............ ...... Totals....000 Salary allowance........

2007 Solutions Manual.©McGraw-Hill Companies. Chapter 12 157 .

2007 158 Fundamental Accounting Principles.©McGraw-Hill Companies. 18th Edition .

..... 1 Benson......000 To record admission of Schmidt......... Capital............................200 + $30... 138. 138........$23....000 ..................... Capital....... 22..$138...........000 ....... 1 Benson.................. 138......................000 30....... Lau................ Capital**.......000 ............... 1 Benson..... Cash.................. Capital*.............................. 23...000) x 3/8 **($214....200 + $30....000 Accumulated Depreciation—Equipment...........000 To record withdrawal of Benson with bonus to old partners.. 138........................ Capital...........000 ......... ©McGraw-Hill Companies..000 Meir....... 138.........000 To record withdrawal of Benson with bonus...........................950 38...................000 ........................................ Capital... 28..............000)] x 3/8............. 1 Benson....000 North.........$138.. 214...................500 Lau..... Capital............000 To record admission of North............500 Cash......000 Schmidt.($70.............. c) Feb.Problem 12-4A (50 minutes) Part 1 a) Feb.... 1 Benson..............................000) x 5/8 e) Feb................... * ($214........... 138........ Capital**.......... Capital. b) Feb............................... Capital.. **[$138...............000 Cash.000 To record withdrawal of Benson with no bonus........... 2007 Solutions Manual... 138.................250 70.................. 138.. * [$138.............. Capital*.. Chapter 12 159 ......... 47............000)] x 5/8...........................($70..................000 ......................................................$23... Equipment................ d) Feb.....200 Meir.....................

.....000 13.375 8...500 = $46..250 To record Rhode’s admission and bonus...............................000 200.......500* x 5/10).......... Capital ($46...........000 ($600.............. Capital ($41......950 9.... Capital..250 = $(41........000 + $262..000 Thus...........000 = $600.............. Rhodes............ Meir........500* x 3/10).. Capital ($41.... Lau...000 + $145.......000) x 25% = $215. 1 Cash..250* x 5/10)... 200..250* x 3/10).$215.. * Supporting calculations ($600........000) x 25% = $200....................000 .. 2007 160 Fundamental Accounting Principles...... Capital.. Capital ($46........... a bonus is paid to new partner. Capital*.. 145....000) x 25% = $186. Capital ($46.................000 12.................... Rhodes... Benson................$186... 1 Cash..250 215. Meir...........500* x 2/10).............. * Supporting calculations ($600.... ©McGraw-Hill Companies..300 23.. Rhodes..........250) Thus...........000 + $200..... Benson.....250 $145... old partners receive a bonus.. 18th Edition .............000 To record admission of Rhodes......625 186......Problem 12-4A (Concluded) Part 2 a) Feb.............. b) Feb.............250* x 2/10)...000 + $294....... *Supporting calculations $168.................. Lau...500 Thus.......000 + $138...........500 To record admission of Rhodes and bonus to old partners................... no bonus is received or paid................ Capital ($41.000 ..250 20........ c) Feb......500 $262..... 1 Cash... 262............................

........ 62. Capital ($212.................. Cogley.......933 10............500 535...........200 Kendra............................................. Mei...........800 435.....200 62.....000+ $31.....$18.200 x 3/6)............................... Cash..............400 233......... Capital ($62................... Loss on Sale of Inventory.......800 x 1/6)........... 2007 Solutions Manual................ 600.......................500 ........ (a) (b) (c) (d) Cash... Capital ($62.. 1........ Capital ($212....................... Capital ($167.... 74.... Cash. Cash.500 200.. ... Mei.....800 x 2/6)................800 x 3/6).............200 37......... 500..... 124....000 37............ Cogley............ Loss on Sale of Inventory........400)...400 537....$12....500 Kendra.............. 245........800 31...467)........800 Accounts Payable................ Kendra..433 177......................... Capital ($37... Capital ($62... Capital ($93.000 + $10................. Cogley...............................200 Accounts Payable................................... Cash......500 + $20.........200 x 1/6).................000 ..400 20....... Capital ($93... Capital ($37..................300 ©McGraw-Hill Companies......... Chapter 12 161 ..... Cogley........................933)..............................................400 6........ Mei...467 Cash. Inventory........ 18...............200 245........................500 Kendra.$6.........................400)......200)....Problem 12-5A (75 minutes) Note: All entries in this problem are dated May 31.000 Gain on Sale of Inventory.............300 2................................................................200 x 2/6)....................100 160..... Capital ($37........600).......000 ...........467 245.....600 12......... Capital ($167. 245.................... Inventory......... Mei.... Gain on Sale of Inventory. (a) (b) (c) (d) 537.....

............. 15.............$108.$95....600 95.. (a) (b) (c) (d) Cash.....................................200).......$47........... 83..................... 245...............266 537.600 x 2/3)...................034 102.........600 245..300 *$212.600 245......... 250............ Cogley.......................... Mei.... Capital ($287...... Mei........................000 ................$72..... Mei.......$16.......................867 ©McGraw-Hill Companies......733 16.. Loss on Sale of Inventory............ Cash...... 245......$143............ Capital ($217..600)...............................200 Kendra.100 130............ Capital ($50....000 217..500 Cogley.... 33................. Kendra..................200 15.900 4......................................800 Cash...........................200 x 3/6)..................... 2007 162 Fundamental Accounting Principles........................................... Capital ($167..867 .. 320................ Capital ($93... Kendra...................................600 x 1/3).......... (a) (b) (c) (d) 537......... Cash.....200 Kendra....................................................400 36. Cash....200 50......500 ..........................................000 ..... Mei.............Problem 12-5A (Concluded) 3..... Inventory.......... Inventory.........200 x 1/6).....500 ............................... Capital ($287.... Capital ($217..500 Cogley.400)..200 x 3/6)................867 Accounts Payable............................. Capital ($212.........$36.000 ...... Capital ($50. Loss on Sale of Inventory......................... Capital ($217.......... 108...600 Accounts Payable. 18th Edition ............................733 ...........................600)....000 287............. Mei...... Cogley...............200 217....... Capital ($93.. Loss on Sale of Inventory..........500 185.600 72.............200 x 1/6)......200 x 2/6).......000 ............200 287..... Capital*............ Cash................500 270........................867 Cogley......200 Cash.....733 **$167............ 140...........$33................ Capital**..... Loss on Sale of Inventory...733 47.........200 x 2/6).......................................................... Capital ($287........... 143.......

©McGraw-Hill Companies. 2007 Solutions Manual. Chapter 12 163 .