College Accounting: Chapter 19 Mastery Problem - Jim Bond, a plumber has been working for Fleming's

College Accounting
Chapter 19 Mastery Problem
Jim Bond, a plumber has been working for Fleming's Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a partnership with Fleming. The new partnership will be called Fleming and Bond’s Plumbing Supplies. The terms of the partnership are as follows:
(a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable.
(b) Bond will invest $50,000 cash.
(c) Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000.
(d) Each partner will receive 10% interest on the January 1 balance of his capital account.
(e) Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%.
a. Fleming will invest the assets of Fleming's Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market value. Fleming has no knowledge of any uncollectible accounts receivable.
b. Bond will invest $50,000 cash.
c. Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000.
d. Each partner will receive 10% interest on the January 1 balance of his capital account.
e. Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%.

REQUIRED
1. Prepare the entries on January 1, 20-2, for the formation of the partnership.
2. Net income for the partnership for 20-2 was $150,000. Prepare the lower portion of the income statement reporting the allocation of the profits to each partner.
3. In December 20-4, Fleming’s daughter, Penny, graduated from business college and asked to join the business as a partner. She has $30,000 to invest and it is agreed that Penny will be given a capital interest of $30,000. Profits and losses will be shared as follows: I. Fleming, 50%; J. Bond, 30%; P. Fleming, 20%. Prepare the entry for Penny’s investment on January 1, 20-5.
4. After several years of operations, it is decided to liquidate the partnership. After making closing entries on July 31, 20-9, the following accounts remain open:
 Cash 20,000
Inventory 150,000
Office Equipment 30,000
Accum Depreciation - Office Equipment 18,000
Store Equipment 22,000
Accum Depreciation - Store Equipment 15,000
Notes Payable 20,000
Ivan Fleming Capital 80,000
Jim Bond, Capital 50,000
Penny Fleming, Capital 39,000
(a) On August 1, 20-9, the inventory is sold for $130,000.
(b) On August 3, the office equipment is sold for $10,000.
(c) On August 5, the store equipment is sold for $12,000.
(d) On August 10, the notes payable are paid.
(e) On August 15, the remaining cash is distributed to the partners according to the balances in their capital accounts.
Prepare a statement of partnership liquidation and related journal entries for the period August 1–15,20-9.
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