# Merrill, Lynch, and Pierce are partners with current capital

### Question Description:

Merrill, Lynch, and Pierce are partners with current capital balances of $10,000, $15,000, and $5,000, respectively. The profit and loss sharing ratio is 1:2:3, respectively. Consider each of the following situations independently. (That is, for each case assume the data shown above). Be sure to show your work. Do not try to cram all of your work in the space below – use additional sheets of paper (or you may complete in Excel or Word). CASE A: Suppose Fenner is admitted to the partnership and given a 25% share of ownership in exchange for a cash contribution of $10,000? What will Fenner’s capital account balance be? Chapter 12_Partnership_New_Questions.docx Admission/Withdrawal of Partners Merrill, Lynch, and Pierce are partners with current capital balances of $10,000, $15,000, and $5,000, respectively. The profit and loss sharing ratio is 1:2:3, respectively. Consider each of the following situations independently. (That is, for each case assume the data shown above). Be sure to show your work. Do not try to cram all of your work in the space below – use additional sheets of paper (or you may complete in Excel or Word). CASE A: Suppose Fenner is admitted to the partnership and given a 25% share of ownership in exchange for a cash contribution of $10,000? What will Fenner’s capital account balance be? $_______________ CASE B: Suppose Smith is admitted to the partnership and given a 20% share of ownership in exchange for a cash contribution of $10,000? What will Lynch’s capital balance be? $_________________ CASE C: Suppose Fenner is admitted to the partnership with a 10% share of ownership in exchange for an $8,000 contribution? What will Pierce’s capital balance be? $__________________ CASE D: Suppose Merrill withdraws from the partnership. He takes $15,000 in full settlement of his equity. What will the capital account balance of Lynch be? $___________________ CASE E: Suppose that the partnership is to be liquidated because Pierce is personally bankrupt. Assume there is a loss on conversion of non-cash assets to cash of $12,000. What will be the amount of cash that Merrill will receive from the partnership in liquidation? Complete a schedule of cash payments to arrive at your final answer. $______________________ CASE F: Fenner paid $8,000 to Merrill for one-half of Merrill’s partnership interest. What is Fenner’s capital account balance after the payment? $_______________________ Profit and Loss Allocation Tinker, Evers and Chance operate a sports partnership. Their capital balances are $20,000, $5,000, and $8,000 respectively. Profits and losses are allocated on a basis that includes interest on capital balances, salaries, and the remainder in a fixed ratio. In each independent case below, determine the allocation of income to each partner. Show your work (the best way to complete each case is to use a net income schedule illustrated in your textbook). Do not try to cram all of your work in the space below – use additional sheets of paper (or you may complete in Excel or Word). CASE A: Net income: $60,000; Interest on capital balances 6%; Salaries: Tinker $8,000, Evers $6,000, Chance $4,000; Fixed Ratio: Tinker 60%, Evers 20%, Chance 20% CASE B: Net income: $90,000; Interest on capital balances 15%; Salaries: Tinker $10,000, Evers $4,000, Chance $14,000; Fixed Ratio: Tinker 30%, Evers 30%, Chance 40% CASE C: Net loss: ($10,000); Interest on capital balances 10%; Salaries: Tinker $6,000, Evers $9,000, Chance $7,000; Fixed Ratio: Tinker 10%, Evers 50%, Chance 40% Read more