PROBLEM 3 Sleepy, Grumpy and Happy are partners. Grumpy received ½ of profits and losses with Ha...
PROBLEM 3
- Sleepy, Grumpy and Happy are partners. Grumpy received ½ of profits and losses with Happy and Sleepy each receiving 1/4. On 1/1/2014 they have the following capital balances
Grumpy $100,000
Happy $50,000
Sleepy $50,000
On 1/2/2014 Grumpy sells ½ of his share of the partnership to Dopey for $80,000. Now all 4 partners will by ¼ owners.
REQUIRED:
Using the Goodwill method, show the capital accounts of the 4 partners on 1/2/2014.
Using the bonus method, show the capital accounts of the 4 partners on 1/2/2014
- It is now 2017 and the capital accounts are as follows:
- Grumpy $80,000
- Happy $2,000
- Sleepy $50,000
- Dopey $90,000
The partners decide to a) ‘pay’ interest of 10% on beginning capital balances, b) ‘pay’ Dopey $12,000 for his extra work in the partnership and c) continue to share profits equally but losses are 10% Dopey and 30% each of the other partners.
In 2017 the partnership had the following:
Sales $400,000
Expenses $285,000 (ignoring any expenses to partners)
In 2018 the partnership had the following
Sales $500,000
Expenses $590,000
DOPEY took his ‘salary’ from the partnership in both years but no other distributions to owners occurred in either 2017 or 2018.
REQUIRED:
DETERMINE THE INCOME DISTRIBUTION FOR 2017
DETERMINE THE CAPITAL ACCOUNTS ON 12/31/17
DETERMINE THE INCOME DISTRIBUTION FOR 2018
DETERMINE THE CAPITAL ACCOUNTS ON 12/31/18
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