Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob

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Steve Reese Is A Well Known Interior Designer In Fort Worth Texas He Wants To Start His Own Business And Convinces Rob 1 (90.16 KiB) Viewed 13 times

Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O'Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2019, O'Donnell invests a building worth $120,000 and equipment valued at $120,000 as well as $40,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances. To entice O'Donnell to join this partnership, Reese draws up the following profit and loss agreement: • O'Donnell will be credited annually with interest equal to 20 percent of the beginning capital balance for the year. • O'Donnell will also have added to his capital account 20 percent of partnership income each year (without regard for the preceding interest figure) or $4,000, whichever is larger. All remaining income is credited to Reese. • Neither partner is allowed to withdraw funds from the partnership during 2019. Thereafter, each can draw $7,000 annually or 10 percent of the beginning capital balance for the year, whichever is larger. The partnership reported a net loss of $9,000 during the first year of its operation. On January 1, 2020, Terri Dunn becomes a third partner in this business by contributing $53,000 cash to the partnership. Dunn receives a 25 percent share of the business's capital. The profit and loss agreement is altered as follows: • O'Donnell is still entitled to (1) interest on his beginning capital balance as well as (2) the share of partnership income just specified. • Any remaining profit or loss will be split on a 6:4 basis between Reese and Dunn, respectively. Partnership income for 2020 is reported as $90,000. Each partner withdraws the full amount that is allowed. On January 1, 2021, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $180,000 directly to Dunn. Net income for 2021 is $150,000 with the partners again taking their full drawing allowance. On January 1, 2022, Postner withdraws from the business for personal reasons. The articles of partnership state that any partner may leave the partnership at any time and is entitled to receive cash in an amount equal to the recorded capital balance at that time plus 10 percent. a. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. b. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. Answer is not complete. Complete this question by entering your answers in the tabs below.
a. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. b. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. Complete this question by entering your answers in the tabs below. Required A Required B Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.) No 1 2 3 5 6 7 8 9 Date 01/01/2018 12/31/2019 01/01/2020 12/31/2020 12/31/2020 01/01/2021 12/31/2021 12/31/2021 01/01/2022 Building Equipment Cash O'Donnell, capital Reese, capital Reese, capital O'Donnell, capital Income summary Cash Reese, capital O'Donnell, capital Dunn, capital Dunn, capital O'Donnell, capital Reese, capital Dunn, drawings O'Donnell, drawings Reese, drawings Income summary O'Donnell, capital Dunn, capital Reese, capital Dunn, capital Postner, capital O'Donnell, capital Postner, capital Reese, capital O'Donnell, drawings Postner, drawings Reese, drawings X Answer is not complete. Income summary O'Donnell, capital Postner, capital Reese, capital Postner, capital O'Donnell, capital Reese, capital Cash General Journal < Required A ♥ ✔ ✔ ✔ ✔ ✔✓ ✔ 5000 500000 5000 50000000 0000 0000 Required B > Debit 120,000 ✓ 120,000✔ 40,000✔ 41,000✔ 53,000✔ 20,000 x 5,000 X Credit Show less A 140,000✔ 140,000✔ 32,000✔ 9,000✔ 78,000 X
a. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. b. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. Complete this question by entering your answers in the tabs below. Required A Required B Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) No 1 2 3 4 5 6 7 8 A 10 Date 01/01/2019 12/31/2019 01/01/2020 12/31/2020 12/31/2020 01/01/2021 01/01/2021 12/31/2021 12/31/2021 01/01/2022 Cash Equipment Building Goodwill O'Donnell, capital Reese, capital Reese, capital O'Donnell, capital Income summary Cash Goodwill Dunn, capital Dunn, capital O'Donnell, capital Reese, capital Dunn, drawings O'Donnell, drawings Reese, drawings Income summary Dunn, capital O'Donnell, capital Reese, capital Goodwill O'Donnell, capital Reese, capital Dunn, capital Dunn, capital Postner, capital Postner, capital O'Donnell, capital Reese, capital Postner, drawings O'Donnell, drawings Reese, drawings Answer is not complete. Income summary O'Donnell, capital Reese, capital Postner, capital Goodwill Postner, capital O'Donnell, capital General Journal 000000 ✔ ♥ ✔ 100 100 100000 0000 0000 0000 0000 0000 000 ✔ Debit Credit Show less A