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    Yount and Lance Division of Partnership Income

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    Division of Partnership Income
    Yount and Lance have a partnership agreement which includes the following provisions regarding sharing net income and net loss:

    1. Since Yount will work only part time in the partnership, he will be allocated a salary allowance that is one half the salary allowance allocated to Lance. Lance's salary allowance will be 10% of sales.

    2. Both partners will be given an interest allowance of 10% on their beginning-of-the-year capital account balances.

    3. The remaining income and loss is to be divided 40% to Yount and 60% to Lance.

    The capital account balances on January 1, 2010, for Yount and Lance were $80,000 and $140,000, respectively. During 2010, the Yount and Lance partnership had sales of $800,000, cost of goods sold of $370,000, and operating expenses of $210,000.

    Prepare a schedule which clearly sets out the division of income or loss to the partners for 2010.

    Plant Asset Disposal Entries
    Prepare the necessary journal entries to record the following transactions in 2010 for Drake Company.

    March 1 Exchanged old store equipment and $80,000 cash for new store equipment. The old store equipment originally cost $96,000 and had a book value of $64,000 on the date of exchange. The old store equipment had a fair market value of $76,000 on the date of exchange. Assume depreciation on the old equipment has already been recorded for the current year. The exchange had commercial substance.

    July 31 Exchanged a delivery truck and $100,000 cash for a new delivery truck. The old delivery truck originally cost $108,000 and had accumulated depreciation of $76,000 on the date of exchange. The fair market value of the old delivery truck on the date of exchange was $24,000. Assume the depreciation on the truck has already been recorded for the current year. The exchange had commercial substance.

    Aug. 31 Equipment with a 4-year useful life was purchased on January 1, 2007, for $60,000 and was sold for $36,000. The equipment had been depreciated using the straight-line method with an estimated salvage value of $12,000. Depreciation Expense was last recorded on December 31, 2009.

    Payroll Accounting
    Ray Company has three employees whose monthly salaries and accumulated year-to-date wages at October 31, 2010 are as follows:

    Employee Wages 10/31/10 Monthly Salary
    Agee $60,000 $6,000
    Bates 95,000 9,500
    Eaton 6,000 4,500

    The following payroll taxes are applicable:
    FICA tax on first $100,000 8%
    FUTA tax on first $7,000 6.2%*
    SUTA tax on first $7,000 5.4%

    *Less a credit equal to the state unemployment tax rate.

    The amount of federal income tax withholding for the November payroll is $900, $1,800, and $800 for Agee, Bates, and Eaton, respectively.

    Prepare the journal entries to record the November payroll and the employer's payroll tax expense for the month of November.

    Depreciation Methods
    The following information is available for Richards Company, which has an accounting year-end on December 31, 2010.

    1. A delivery truck was purchased on June 1, 2008, for $80,000. It was estimated to have an $8,000 salvage value after being driven 120,000 miles. During 2010, the truck was driven 20,000 miles. The units-of-activity method of depreciation is used.

    2. A building was purchased on January 1, 1983, for $3,000,000. It is estimated to have a $30,000 salvage value at the end of its 40-year useful life. The straight-line method of depreciation is being used.

    3. Store equipment was purchased on January 1, 2009, for $180,000. It was estimated that the store equipment would have an $18,000 salvage value at the end of its 5-year useful life. The double-declining-balance method of depreciation is being used.

    Complete the table shown below by filling in the appropriate amounts.
    Accumulated Depreciation
    Depreciation Expense for Book Value at
    Assets 1/1/10 2010 12/31/10
    Delivery truck $ 31,200 $ $
    Building $2,004,750 $ $
    Store equipment $ 72,000 $ $

    Partnership Liquidation
    The balance sheet of the ABC partnership just prior to liquidation appears below:

    Balance Sheet
    December 31, 2010

    Assets Liabilities and Owners' Equity

    Cash $ 70,000 Liabilities $120,000
    Noncash assets 190,000 Agler, Capital 20,000
    Bell, Capital 80,000
    Colaw, Capital 40,000
    $260,000 $260,000

    Other information:
    1. The partners Agler, Bell, and Colaw share profits and losses in the ratio of 6:3:1.
    2. The noncash assets are sold for $140,000.
    3. The liabilities are paid in full.
    4. The remaining assets are distributed to the partners. Assume that if any partner has a capital deficiency, he will not be able to pay the amount owed to the partnership.

    Prepare the entries to record the liquidation of the ABC partnership.

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    Solution Summary

    The solution explains some questions relating to accounting. Detailed answers are provided in the attached Word document and calculations are also presented in an attached Excel file.