Accounting for Special Transaction

Assignment

3. Use the information in problem 1. Sunny and Gloomy agreed to have equal credits
to their capital accounts. The bonus method shall be used.

Requirements:
a. Provide the compound journal entry.

Cash 180,000
Accounts Receivable 100,000
Inventory 120,000
Land 600,000
Allowance for Bad debts 40,000
Accounts Payable 60,000
Sunny, Capital 450,000
Gloomy, Capital 450,000

b. Provide the simple journal entries

Gloomy, Capital 150,000

Sunny, Capital 150,000

4. Use the information in problem 1. Sunny and Gloomy agreed to have equal credits
to their capital accounts. Cash settlement is to be made between the partners for the
adjustment on their capital balances.

Requirement: Describe how the cash settlement should be made and how it would be
accounted for in the partnership books.

Cash 180,000
Accounts Receivable 100,000
Inventory 120,000
Land 600,000
Allowance for Bad debts 40,000
Accounts Payable 60,000
Sunny, Capital 450,000
Gloomy, Capital 450,000

Note: Cash settlement between the partners are personal. Therefore, this is not
accounted for in the partnership books. Since Sunny is the one with deficient
contribution, he/she will pay Groomy for his deficiency. This transaction is outside of
the partnership.

5. Use the information in problem 1. Sunny and Gloomy agreed to have equal credits
to their capital accounts. Additional investment or partial withdrawal shall be made by
a partner from the partnership for any adjustment to his capital balance.
Requirement: Which partner should make an additional investment and which partner
should make a withdrawal?

Agreed Initial Capital: 900,000

Sunny: 900,000x30%= (270,000)
Gloomy: 630,000
Sunny shall withdraw 270,000 from her investment and G should make additional
investment of 30,000