ASSIGNMENT

NOTE: Solve the following questions and submit on google classroom. No typed
assignment will be accepted. Solve the questions on paper and take a clear scan of it and
upload.

EXERCISE 1
Morton and Long plan to enter into a law partnership, investing $30,000 and $20,000,
respectively. They have agreed on everything but how to divide the profits. Calculate
each partner’s share of the profit under each of the following independent assumptions.
a. If the first year’s net income is $50,000 and they cannot agree, how should the
profits be divided?
b. If the partners agree to share net income according to their investment ratio, how
should the $50,000 be divided?
c. If the owners agree to share net income by granting 10 percent interest on their
original investments, giving salary allowances of $10,000 each, and dividing the
remainder equally, how should the $50,000 be divided?
EXERCISE 2
After a number of years, Long, from Exercise 14.1, decided to go with a large law firm
and wishes to sell his interest to Brown. Long’s equity at this time is $35,000. Morton
agrees to take Brown as a partner, and Long sells his interest to Brown for $40,000.
Prepare the general journal entry on December 31, 20XX to record the sale of Long’s
interest to Brown.
EXERCISE 3
Smith, White, and Saint are partners owning the Book Nook. The equities of the partners
are $60,000, $50,000, and $40,000, respectively. They share profits and losses equally.
White wishes to retire on May 31, 20XX. Prepare the general journal entries to record
White’s retirement under each independent assumption.
a. White is paid $50,000 in partnership cash.
b. White is paid $40,000 in partnership cash.
c. White is paid $55,000 in partnership cash.
EXERCISE 4
Martin, Pearson, and Henderson are partners sharing profits and losses in a 2:1:1 ratio.
Their capital balances are $30,000, $25,000, and $20,000, respectively. Because of an
economic
turndown, they have decided to liquidate. After all assets are sold and the creditors
paid, $43,000 cash remains in the business chequing account.
a. Determine the amount of their losses by using the accounting equation.
b. Using the profit-loss ratio, determine the amount of loss to be distributed to each
partner, and determine their new capital balances.
c. Determine the amount of cash each partner will receive in the final distribution.