CHAPTER 2 – PARTNERSHIP OPERATIONS

PROBLEM 6 and 8 with Worksheet

6.)

1. COGS 2,336,000
Ending Inventory 600,000
Beginning Inventory 630,000
Purchases 2,306,000

2. Bad Debt Expense 18,000

Allowance for Bad Debts 18,000

3. Depreciation Expense 52,800

Acc. Depreciation 52,800

4. Supplies 16,000
G&A Expense 16,000

7. Income Tax Expense 119,160

5. G&A Expense 20,000
Income Tax Payable 119,160
Accrued Expense Payable 20,000

6. Prepaid Rent 30,000

Selling expense 30,000

Trial Balance Adjustment Adjusted

Accounts Debit Credit Debit Credit Debit Credit
Cash 560,000       560,000  
Accounts Receivable 360,000       360,000  
Allowance for Bad Debts   (18,000)   (18,000)   (36000)
Merchandise Inventory 630,000   600,000 (630,000) 600,000  
Furniture and Equipment 556,000       556,000  
Accum. Depreciation-Furniture and Eqp   (105,600)   (52,800)   (158,400)
Accounts Payable   (742,000)       (742,000)
CG, Capital   (600,000)       (600,000)
CG, Drawing 96,000       96,000  
JV, Capital   (394,400)       (394,400)
JV, Drawing 130,000       130,000  
Sales   (4,336,000)       (4,336,000)
Sales Returns and Allowances 54,000       54,000  
Sales Discounts 124,000       124,000  
Purchases 2,556,000     (2,306,000) 250,000  
Purchase Discounts   (250,000)       (250,000)
Selling Expense 720,000     (30,000) 690,000  
General and Administrative Expenses 660,000   20,000 (16,000) 664,000  
Accrued Expense payable       (20,000)   (20,000)
Bad Debt Expense     18,000   18,000  
COGS     2,336,000   2,336,000  
Depreciation Expense     52,800   52,800  
Prepaid Rent     30,000   30,000  
Income Tax Expense         119,160  
Income Tax Payable           (119,160)
Supplies     16,000   16,000  
           
6,446,000 (6,446,000) 3,072,800 (3,072,800) 6,655,960 (6,655,960)
 Income Statement Balance Sheet
Accounts        
Cash     560,000  
Accounts Receivable     360,000  
Allowance for Bad Debts       (36000)
Merchandise Inventory     600,000  
Furniture and Equipment     556,000  
Accum. Depreciation-Furniture and Eqp       (158,400)
Accounts Payable       (742,000)
CG, Capital       (600,000)
CG, Drawing     96,000  
JV, Capital       (394,400)
JV, Drawing     130,000  
Sales   (4,336,000)    
Sales Returns and Allowances 54,000      
Sales Discounts 124,000      
Purchases 250,000      
Purchase Discounts   (250,000)    
Selling Expense 690,000      
General and Administrative Expenses 664,000      
Accrued Expense payable       (20,000)
Bad Debt Expense 18,000      
COGS 2,336,000      
Depreciation Expense 52,800      
Prepaid Rent     30,000  
Income Tax Expense 119,160      
Income Tax Payable       (119,160)
Supplies     16,000  
Total 4307960 (4,586,000) 2348000 (2,069,960)
Net Income 278,040     (278,040)
Totals 4,586,000 (4,586,000) 2,348,000 (2,348,000)
 Income Statement
Sales 4,158,000
Less: COGS
Inventory, Jan 1 630,000
Purchases 2,556,000
Less: Purchase Discount -250,000
Cost of Goods Sold Available for Sale 2,936,000
Less: Inventory, Dec 31 -600,000
COGS 2,336,000 -2,336,000
Gross Profit     1,822,000
Less: Operating Expenses
Selling Expense 690,000
G&A Expense 664,000
Bad Debt Expense 18,000
Depreciation Expense 52,800
Total Expenses 1,424,800   -1,424,800
       
       
       
Profit before Income Tax 397,200
Less: Income Tax Expense -119,160
Profit     278,040

Division of Profit
Titles CG JV Total
Interest Allowance 60,000 39,440 99,440
Salary Allowance 100,000 60,000 160,000
Remainder 9,300 9,300 18,600
Total 169,300 108,740 278,040

Statement of Changes in Partners Equity

Title CG JV Total
Partners' Eq Jan 1 600,000 394,400 994,400
Add: Share in Profit 169,300 108,740 278,040
Total 769,300 503,140 1,272,440
Less: Drawings -96,000 -130,000 -226,000
Partners' Eq Dec,31 673,300 373,140 1,046,440

Statement of Financial Position

Assets
Cash 560,000
A/R 360,000
Less: Allowance -36,000
Supplies 16,000
F&F 556,000
Less: Acc Dep -158,400
Inventory 600,000
Prepaid Rent 30,000
Total Asset     1,927,600

Liab and Equity

A/P 742,000
A/E Payable 20,000
I/T Payable 119,160

CG, Capital 673,300

JV, Capital 373,140

Total L and E     1,927,600

8.)

1. Interest Expense 21,000

Interest Payable 21,000

2. COGS 2,636,000
Ending Inventory 332,000
Beginning Inventory 288,000
Purchases 2,680,000

3. Cash 80,000
JCS, Capital 80,000

4. Income Tax Expense 74,100

Income Tax Payable 74,100
 Trial Balance Adjustment Adjusted
Account Debit Credit Debit Credit Debit Credit
Cash 484,000   80,000   564,000  
A/R 640,000       640,000  
Inventory 288,000   332,000 (288,000) 332,000  
A/P   (608,000)       (608,000)
N/P   (280,000)       (280,000)
JCS, Capital   (200,000)   (80,000)   (280,000)
MTR, Capital   (280,000)       (280,000)
JCS, Drawing 80,000       80,000  
MTR, Drawing 100,000       100,000  
Sales   (4,180,000)       (4,180,000)
Purchases 2,720,000     (2,680,000) 40,000  
Purchase returns   (40,000)       (40,000)
Salaries and wages 120,000       120,000  
Rent Exp 520,000       520,000  
Delivery Exp 168,000       168,000  
Store Exp 366,000       366,000  
Other A. Exp 102,000       102,000  
Interest Expense     21,000   21,000  
Interest Payable       (21,000)   (21,000)
COGS     2,636,000   2,636,000  
Income Tax Exp         74,100  
Income Tax Payable           (74,100)
Total 5,588,000 (5,588,000) 3,069,000 (3,069,000) 5,689,000 (5,689,000)
 Income Statement Balance Sheet
Account Debit Credit Debit Credit
Cash 564,000
A/R 640,000
Inventory 332,000
A/P -608000
N/P -280,000
JCS, Capital -280,000
MTR, Capital -280,000
JCS, Drawing 80,000
MTR, Drawing 100,000
Sales (4,180,000)
Purchases 40,000
Purchase returns (40,000)
Salaries and wages 120,000
Rent Exp 520,000
Delivery Exp 168,000
Store Exp 366,000
Other A. Exp 102,000
Interest Expense 21,000
Interest Payable -21,000
COGS 2,636,000
Income Tax Exp 74,100
Income Tax Payable -74,100
Total 4,047,100 (4,220,000) 1,716,000 (1543100)
Net Income 172,900 172,900
Total 4,220,000 (4,220,000) 1,716,000 (1,716,000)
 Income Statement
Sales 4,180,000

Less: COGS
Inventory, Jan 1 288,000
Purchases 2,720,000
Less: Purchase Returns -40,000
COGS Available for sale 2,968,000
Less: Inventory, Dec 31 -332,000
COGS 2,636,000 -2,636,000
Gross Profit   1,544,000
Less: Operating Expenses
Salaries and wages 120,000
Rent Exp 520,000
Delivery Exp 168,000
Store Exp 366,000
Other A. Exp 102,000
Interest Expense 21,000
Total Expense 1,297,000 -1,297,000
Profit before Income Tax 247,000
Less: Income Tax Exp -74,100
Profit   172,900

Division of Profit
Title JCS MTR Total
Interest Allowance 8,400 11,400 19,800
Salary Allowance 120,000 160,000 280,000
Remainder -63,450 -63,450 -126,900
Total 64,950 107,950 172,900

Statement of Changes in Equity

Title JCS MTR Total
Partners' Equity Jan 1 200,000 280,000 480,000
Add: Profit 64,950 107,950 172,900
Add: Additional Inv 80,000 80,000
Total 344,950 387,950 652,900
Less: Drawings -80,000 -100,000 -180,000
Partners' Equity Dec 31 264,950 287,950 552,900
 Statement of Financial Position
Assets
Cash 564,000
A/R 640,000

Inventory 332,000
Total Asset 1,536,000

Liabilities and Equity

Accounts Payable 608,000
Interest Payable 21,000
Notes Payable 280,000
Income Tax Payable 74,100
Total Liabilities 983,100

JCS, Capital 264,950

MTR, Capital 287,950
Total Equity 552,900
1,536,000