1.1. Presented below is certain information pertaining to Madison Company.

Assets, January 1 $250,000

Assets, December 31 230,000

Liabilities, January 1 150,000

Common stock, December 31 90,000

Retained earnings, December 31 41,000

Common stock sold during the year 10,000

Dividends declared during the year 13,000

Compute the net income for the year.

1.2. Presented below are changes in the account balances of Sassy Company during the year, except

for retained earnings.

Increase Increase

(Decrease) (Decrease)

Cash $29,000 Accounts payable $34,000

Accounts receivable (net) (18,000) Bonds payable (20,000)

Inventory 52,000 Common stock 62,000

Plant assets (net) 57,000 Paid-in capital 16,000

The only entries in Retained Earnings were for net income and a dividend declaration of $17,000.

A. Compute the net income for the current year.

B. Explain what else can affect the Retained Earnings account.

1.3. Presented below is information related to Cloud Company at December 31, 2017, the end of its

first year of operations.

Sales revenue $775,000

Cost of goods sold 350,000

Selling and administrative expenses 125,000

Gain on sale of plant assets 75,000

Unrealized gain on available-for-sale investments 25,000

Interest expense 15,000

Loss on discontinued operations 30,000

Allocation to noncontrolling interest 100,000

Dividends declared and paid 12,000

Instructions

Compute the following:

(a) income from operations,

(b) net income,

(c) net income attributable to Cloud Company's controlling stockholders,

(d) comprehensive income, and

(e) retained earnings

balance at December 31, 2017. Ignore income tax effects.

1. On April 30, 20x1, A, B and C formed a partnership. A contributed cash of 50,000. B contributed property with 36,000 carrying amount, 40,000 original cost and 80,000 fair value. The partnership accepted responsibility for the 35,000 mortgage attached to the property. C contributed equipment with 30,000 carrying amount, 75,000 original cost and 55,000 fair value. The partnership agreement specifies that profits and losses are to be shared equally but is silent regarding capital contributions. Which partner has the smallest April 30, 20x1 capital account balance?

2. A and B formed a partnership. The following are their contributions: A B Cash 200,000 - Accounts receivable 150,000 - Inventory 100,000 - Land 500,000 Building 620,000 Total 450,000 1,120,000 Note payable 220,000 A, capital 230,000 B, capital 1,120,000 Total 450,000 1,120,000 Additional information: The accounts receivable has a recoverable amount of 120,000. The inventory has an estimated selling price of 110,000 and estimated costs to sell of 20,000. The land has a fair value of 500,000 an unpaid mortgage of 120,000. The partners agreed that B shall settle the mortgage using his personal funds. The building is over-depreciated by 30,000. The building also has an unpaid mortgage amounting to 550,000. The partners agreed that the partnership shall assume repayment of the mortgage. The note payable has a fair value of 210,000. A and B shall share in profits and losses 40% and 60%, respectively. How much are the adjusted capital balances of A and B, respectively?

3. A and B agreed to form a partnership. A shall contribute 60,000 cash while B shall contribute 120,000 cash. However due to the expertise that A will be bringing to the partnership, the partners agreed that they should initially have an equal interest in the partnership capital. Under the bonus method, how much is the adjusted capital balance of B immediately after the formation of the partnership?

4. A, B and C formed a partnership. Their contributions are as follows: A B C Cash 50,000 40,000 140,000 Equipment 150,000 Totals 50,000 190,000 140,000 Additional information: Although C has contributed the most cash to the partnership, he did not have the full amount of 140,000 available and was forced to borrow 40,000. The partners agreed that half of the amount borrowed shall be assumed by the partnership. The equipment contributed by B has an unpaid mortgage of 20,000, the repayment of which is not assumed by the partnership. The partners agreed to equalize their interests. Cash settlements among the partners are to be made outside the partnership. Which partner(s) shall receive cash payment from the other partner(s)?

5. A and B agreed to form a partnership. The partnership agreement stipulates the following: Initial capital of 300,000. A 25:75 interest in the equity of the partnership. A contributed 100,000 cash, while B contributed 200,000 cash. Which partner should provide additional investment (or withdraw part of his investment) in order to bring the partners' capital credits equal to their respective interests in the equity of the partnership?

6. A and B formed a partnership on March 1, 20x1. The partnership agreement stipulates the following: Monthly salary allowances of 10,000 for A and 6,000 for B. Salary allowances are to be withdrawn by the partners throughout the period and are to be debited to their respective drawings accounts. The partners share profits equally and losses on a 60:40 ratio. During the period the partnership earned profit of 200,000 before salary allowances. How much is the share of Partner B in the partnership profit?

7. Maxwell is trying to decide whether to accept a salary of 40,000 or a salary of 25,000 plus a bonus of 10% of profit after salaries and bonus, as a means of allocating profit among partners. Salaries traceable to the other partners are estimated to be 100,000. What amount of profit would be necessary so that Maxwell would consider the choices to be equal?

8. Garcia and Henson formed a partnership on January 2, 2005 and agreed to share profits 90% and 10%, respectively. Garcia contributed capital of 25,000. Henson contributed no capital but has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The partnership agreement provides for the following: Capital accounts are to be credited annually with interest at 5% of beginning capital. Henson is to be paid a salary of 1,000 a month. Henson is to receive a bonus of 20% of income calculated before deducting his salary, bonus and interest on capital account. The partnership 2005 income statement as follows: Revenues 96,450 Expenses (including salary, interest, and bonus) 49,700 Net income 46,750 What is Henson's 2005 bonus?

9. The statement of financial position of AB Partnership shows the following information as of July 1, 20x1: Cash 48,000 Receivable from A 32,000 Equipment 1,560,000 Totals 1,640,000 Payable to B 40,000 A, Capital (40%) 600,000 B, Capital (60%) 1,000,000 Totals 1,640,000 On July 1, 20x1, the partners decide to admit C as a new partner with a 20% interest. The net assets of the firm as of this date approximate their fair values. If no bonus shall be allowed, how much should C invest in the partnership?

10. The following are the capital account balances and profit and loss ratios of the partners in AB Partnership as of Jan. 1, 20x1: Capital accounts Profit & loss ratios A, Capital 600,000 40% B, Capital 1,000,000 60% 1,600,000 On Jan. 1, 20x1, C was admitted into the partnership when he invested equipment with a historical cost of 400,000 and fair value of 320,000 for a 20% interest. The net assets of the partnership as of this date approximate their fair values. If the bonus method is used to record the admission of C, how much would be credited to C's capital account?