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Partnership Roundtable Activity

Partnership Roundtable Activity. Station #1: Establishing Questions. Give the entries to establish these businesses. #1: Frank, Dean and Sammy enter into a partnership. Each contributes $45,000.

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Partnership Roundtable Activity

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  1. Partnership Roundtable Activity

  2. Station #1: Establishing Questions Give the entries to establish these businesses. #1: Frank, Dean and Sammy enter into a partnership. Each contributes $45,000. #2: Ben, Glen and Ken enter into a partnership. They contributed $30,000, $20,000 and $10,000 respectively. #3: Ron, Don and Jon enter into a partnership. Ron contributes land worth $50,000. Don contributes $1,000 and Jon contributed $30,000 and a vehicle worth $9,000.

  3. Station #1: Establishing Solutions #1: Cash 135,000 Frank, Capital 45,000 Dean, Capital 45,000 Sammy, Capital 45,000 #2 Cash 60,000 Ben, Capital 30,000 Glen, Capital 20,000 Ken, Capital 10,000 #3 Cash 31,000 Auto 9,000 Land 50,000 Ron, Capital 50,000 Don, Capital 1,000 Jon, Capital 39,000

  4. Station #2: Adding (Bonus to Old) Questions #1 A. Duke, D. King and B. Prince are partners with an income ratio of 5:3:2 and $70 000, $45 000 and $28 000 in their capital accounts, respectively. They think that K. Knight would be a good fit in their business. Record the entry of K. Knight if he invests $40 000 in the business for a 15% share, with the bonus going to the existing owners.

  5. Station #2: Adding (Bonus to Old) Solutions

  6. Station #3: Adding (Bonus to New) Questions #1 Kermit and Fozzie are partners. They have capital balances of $30 000 and $20 000 respectively, and have an income ratio of 60% and 40%. They agree to have Gonzo be a new partner. Gonzo invests $10 000 for a 30% share, with the bonus going to the new partner. Give the journal entry to record the addition of the new partner.

  7. Station #3: Adding (Bonus to New) Solutions

  8. Station #4: W/D (Bonus to Remaining) Questions #1 Orr, Hull and Howe are partners with capital balances of $50 000, $60 000 and $90 000, respectively. They have an income ratio of 3:4:5. Orr decides to leave the partnership. Show the entry to record Orr's departure considering Orr is paid $40 000 from partnership assets, with the bonus to the remaining partners.

  9. Station #4: W/D (Bonus to Remaining) Solutions Orr, Capital 50000 Hull, Capital (10000 x 4/9)4444 Howe, Capital (10000 x 5/9)5556 Cash 40000

  10. Station #5: W/D (Bonus to Leaving) Questions • Petters, Minute and Regan are partners, sharing profits at the rates of 60%, 20% and 10%, respectively. Regan, who has $58 000 in her capital account, has decided to leave and start her own business. Record the entry to record her departure, assuming (b) Regan is paid $70 000 with the bonus to the departing partner.

  11. Station #5: W/D (Bonus to Leaving) Solutions

  12. Station #6: Dissolution Questions • 1. Haney, Koolen and Wallen are partners with capital balances of $140 000, $100 000 and $170 000 respectively. They share all profits and losses equally. The partners have decided to close down the business. They manage to liquidate all of the assets at a gain of $60 000. Show the entry to allocate the gain to the partners and the entry to dissolve the business.

  13. Station #6: Dissolution Solutions

  14. Station #7: Dividing Income (loss) Questions #1 Payton and Sanders have a partnership with a 5:4 income ratio. The business recorded a net income of $124 000, Show the entry to allocate the net income to the partners' capital accounts.

  15. Station #7: Dividing Income (loss) Solutions Cash $124,000 Payton (124,000*4/9) $55,111.11 Sanders (124,000*5/9) $68,888.88

  16. Station #8: Theory Questions • 1) Define partnership • 2) List 4 advantages and 4 disadvantages of partnerships • 3) outline the difference between limited and general partnerships

  17. Station #8: Theory Solutions • A partnership is an agreement in which two or more people combine resources in a business with a view to making a profit. Advantages of Partnership Ease of formation Low start-up costs Additional sources of investment capital Possible tax advantages Limited regulation Broader management base Disadvantages of Partnership Unlimited liability Divided authority Difficulty in raising additional capital Hard to find suitable partners Possible development of conflict between partners In a general partnership, the owners share the management of a business, and each partner is personally liable for all debts and obligations incurred A limited partnership involves limited partners who combine only capital. They are not as involved in managing the business and cannot be liable for more than the amount of capital they have contributed. This is known as limited liability.

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