Financial Accounting Paper 5

1

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, Carrís unidentifiable asset should be debited for






2

When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partnerís capital account?






3

Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, year 1, their respective capital accounts were as follows:
Blau $60,000
Rubi 50,000
On that date, Lind was admitted as a partner with a one-third interest in capital and profits for an investment of $40,000. The new partnership began with total capital of $150,000. Immediately after Lindís admission, Blauís capital should be






4

Kern and Pate are partners with capital balances of $60,000 and $20,000, respectively. Profits and losses are divided in the ratio of 60:40. Kern and Pate decided to form a new partnership with Grant, who invested land valued at $15,000 for a 20% capital interest in the new partnership. Grantís cost of the land was $12,000. The partnership elected to use the bonus method to record the admission of Grant into the partnership. Grantís capital account should be credited for






5

Dunn and Grey are partners with capital account balances of $60,000 and $90,000, respectively. They agree to admit Zorn as a partner with a one-third interest in capital and profits, for an investment of $100,000, after revaluing the assets of Dunn and Grey. Goodwill to the original partners should be






6

In the Adel-Brick partnership, Adel and Brick had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The bonus method was used to record Colterís admittance as a new partner. What ratio would be used to allocate, to Adel and Brick, the excess of Colterís contribution over the amount credited to Colterís capital account?






7

Allen retired from the partnership of Allen, Beck, and Chale. Allenís cash settlement from the partnership was based on new goodwill determined at the date of retirement plus the carrying amount of the other net assets. As a consequence of the settlement, the capital accounts of Beck and Chale were decreased. In accounting for Allenís withdrawal, the partnership could have used the
Bonus method. . . . Goodwill method






8

When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Millís interest exceeded Millís capital balance. Under the bonus method, the excess






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