Chapter 12 Partnerships Accounting, 22st Edition Warren Reeve Fess © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

Setelah mempelajari Bab ini Mahasiswa diharapkan dapat: Objectives Menjelaskan Karakteristik perusahaan Perorangan dan Persekutuan 2. Menjelaskan Struktur statement of Partnership Equity Memahami Akuntansi Partnership yg meliputi: Forming Dividing Income Partnership Dissolution Liquidating Setelah mempelajari Bab ini Mahasiswa diharapkan dapat:

Alternative Forms of Business Entities Advantages Mudah dibentuk Biaya Pendiriannya murah A proprietorship is owned by one individual. Disadvantages Modal Kecil Unlimited liability/Kewajiban tak terbatas Joe’s Review of Chapter 1

Alternative Forms of Business Entities Advantages The ability to obtain large amounts of resources by issuing stocks Limited liability for the owners A corporation is organized under state or federal statutes as a separate legal entity. J & M, Inc. Disadvantages Double taxation More complexity and regulations

Alternative Forms of Business Entities A business may organize as an S Corporation. The IRS allows income to pass through the S Corporation to the individual stockholder without the corporation having to pay tax on the income. J & M, Inc.

Alternative Forms of Business Entities A partnership is an association of two or more individuals. Advantages Modal lbh besar Keahlian Manajemennya lbh bagus Joe and Marty’s

Alternative Forms of Business Entities A partnership is an association of two or more individuals. Disadvantages Limited life Unlimited liability Co-ownership of partnership property Mutual agency Joe and Marty’s

Alternative Forms of Business Entities A partnership is created by a contract, known as the partnership agreement or articles of partnership.

Alternative Forms of Business Entities A variant of the regular partnership is a limited partnership. This form of partnership allows partners that are not involved in the operations of the partnership to retain limited liability.

Limited Liability Corporations Combines the advantages of the corporate and partnership forms. Owners are termed “members” rather than “partners.” Members must create an operating agreement. LLC may elect to be treated as a partnership for tax purposes. Continued

Limited Liability Corporations Unless specified in the operating agreement, LLCs have a limited life. Members may elect operating the LLC as a “member managed” entity. LLC provides limited liability for the members. LLCs must file “articles of organization” with state governmental authorities.

Comparison of Alternate Entity Characteristics Ease of Formation Proprietorship Simple Corporation Complex Partnership Simple LLC Moderate

Comparison of Alternate Entity Characteristics Legal Liability Proprietorship No limitation Corporation Limited liability Partnership No limitation LLC Limited liability

Comparison of Alternate Entity Characteristics Limitation on Life of Entity Proprietorship Yes Corporation No Partnership Yes LLC Yes

Comparison of Alternate Entity Characteristics Ease of Raising Capital Proprietorship Difficult Corporation Easier Partnership Moderate LLC Moderate

Equity Reporting for Alternative Entity Forms Proprietorships Proprietorships use a capital account to record investments by the owner of the business. Withdrawals by the owner are recorded in the owner’s drawing account.

Statement of Owner’s Equity For the year ended December 31, 2006 Equity Reporting for Alternative Entity Forms Proprietorships Greene Landscapes Statement of Owner’s Equity For the year ended December 31, 2006 Duncan Greene, capital, Dec. 31, 2005 $345,000 Net income $79,000 Less withdrawals 35,000 Increase in owner’s equity 44,000 Duncan Greene, capital, Dec. 31, 2006 $389,000

Equity Reporting for Alternative Entity Forms Corporations Investments by stockholders in the business use capital stock accounts, such as Common Stock and Preferred Stock. Dividends to owners (stockholders) are recorded by a debit to Retained Earnings.

Equity Reporting for Alternative Entity Forms Corporations

Equity Reporting for Alternative Entity Forms Partnerships and Limited Liability Corporations Setoran Modal dan Withdrawal dicatat terpisah antar Partner Limited liability corporations are similar to a partnership except that each owner is referred to as “member.”

Equity Reporting for Alternative Entity Forms Partnerships

Stevens’ Transfer of Assets, Liability, and Equity Forming a Partnership Joseph Stevens and Earl Foster agree to combine their hardware businesses in a partnership. They agree that the partnership is to assume the liabilities of the separate businesses. Stevens’ Transfer of Assets, Liability, and Equity Apr. 1 Cash 7 200 00 Accounts Receivable 16 300 00 Merchandise Inventory 28 700 00 Store Equipment 5 400 00 Office Equipment 1 500 00 Allowance for Doubtful Accounts 1 500 00 Accounts Payable 2 600 00 Joseph Stevens, Capital 55 000 00

Forming a Partnership A similar entry would be made for the assets, liabilities, and equity of Earl Foster.

Stevens’ Transfer of Assets, Liability, and Equity Forming a Partnership Assume that instead of forming a partnership, the two men formed a limited liability corporation. Stevens’ Transfer of Assets, Liability, and Equity Apr. 1 Cash 7 200 00 Accounts Receivable 16 300 00 Merchandise Inventory 28 700 00 Store Equipment 5 400 00 Office Equipment 1 500 00 Allowance for Doubtful Accounts 1 500 00 Accounts Payable 2 600 00 Joseph Stevens, Member Equity 55 000 00

Apabila diketahui Net Income th berjalan $75,000. Dividing Income Services of Partners Formula pembagian Laba-rugi Partnership dari Stone dan Mills adalah sbb: 1. Annual salary allowance of $30,000 to Tn A and Tn B is to receive $24,000. 2. Any net income is to be divided equally. Apabila diketahui Net Income th berjalan $75,000. J. Stone C. Mills Total Salary allowance $30,000 $24,000 $54,000 Remaining income 10,500 10,500 21,000 Division of net income $40,500 $34,500 $75,000

Dividing Income Services of Partners Dec. 31 Income Summary 75 000 00 Jennifer Stone, Capital 40 500 00 Crystal Mills, Capital 34 500 00

Dividing Income LLC Alternative Dec. 31 Income Summary 75 000 00 Jennifer Stone, Member Equity 40 500 00 Crystal Mills, Member Equity 34 500 00

Apabila diketahui Net Income th berjalan $75,000. Dividing Income Services of Partners Formula pembagian Laba-rugi Partnership dari Tn Stone dan Mills adalah sbb: Annual salary allowance of $30,000 Tn Stone and Tn Mills to receive $24,000. Diberikan bunga 12% atas Saldo Modal masing2 Sisa Lebih/Kurang dibagi sama rata Apabila diketahui Net Income th berjalan $75,000.

Services of Partners and Investments Dividing Income Services of Partners and Investments J. Stone C. Mills Total Salary allowance $30,000 $24,000 $54,000 Interest allowance 9,600 7,200 16,800 Remaining income 2,100 2,100 4,200 $80,000 x 12% $60,000 x 12% Division of net income $41,700 $33,300 $75,000

Dividing Income Services of Partners Dec. 31 Income Summary 75 000 00 Jennifer Stone, Capital 41 700 00 Crystal Mills, Capital 33 300 00

Dividing Income LLC Alternative Dec. 31 Income Summary 75 000 00 Jennifer Stone, Member Equity 41 700 00 Crystal Mills, Member Equity 33 300 00

Allowances Exceed Net Income Dividing Income Allowances Exceed Net Income Assume the same facts as before except that the net income is only $50,000. J. Stone C. Mills Total Salary allowance $30,000 $24,000 $54,000 Interest allowance 9,600 7,200 16,800 Total $39,600 $31,200 $70,800 Deduct excess equally 10,400 10,400 20,800 Division of net income $29,200 $20,800 $50,000

Dividing Income Services of Partners Dec. 31 Income Summary 50 000 00 Jennifer Stone, Capital 29 200 00 Crystal Mills, Capital 20 800 00

Dividing Income Allowances Exceed Net Income Assume the same facts as before except that the net LOSS is $10,000. J. Stone C. Mills Total Salary allowance $30,000 $24,000 $54,000 Interest allowance 9,600 7,200 16,800 Total $39,600 $31,200 $70,800 Deduct excess equally 40,400 40,400 80,800 Division of net income ($800) ($9,200) ($10,000)

Dividing Income Services of Partners Dec. 31 Jennifer Stone, Capital 800 Crystal Mills, Capital 9 200 Income Summary 10 000

Partnership Dissolution Dissolution terjadi apabila ada perubahan anggota Partners. Masuknya partner baru atau keluarnya partner lama Sebelum dissolution perusahaan harus melakukan Revaluasi atas assetnya Revaluasi adalah menilai kembali seluruh assetnya berdasar nilai wajar pada saat itu

Partnership Dissolution Revaluation of Assets Partners Donald Lewis and Gerald Morton mempunyai saldo modal masing-masing $35,000 and $25,000. Hasil revaluasi terdapat kenaikan nilai atas Merchandise Inventory dari $14,000 menjadi $17,000. Laba-Rugi dibagi sama rata

Partnership Dissolution Revaluation of Assets June 1 Merchandise Inventory 3 000 00 Donald Lewis, Capital 1 500 00 Gerald Morton, Capital 1 500 00

Partnership Dissolution Admitting a Partner Masuknya Anggota baru dalam Partnership ada dua cara: Purchasing an interest from one or more of the current partners. Membeli kepemilikan modal dari partner yang lama. 2. Contributing assets to the partnership. Menyetor asset ke perusahaan

Partnership Dissolution Purchasing an Interest in a Partnership Partners Andrews and Bell mempunyai saldo modal masing2 $50,000. tgl 1 June Joe bergabung dengan membeli 1/5 kepemilikan Modal masing2 partner lama.

Partnership Dissolution Purchasing an Interest in a Partnership June 1 Tom Andrews, Capital 10 000 00 Nathan Bell, Capital 10 000 00 Joe Canter, Capital 20 000 00 For a LLC, members’ equity accounts would have been used rather than capital accounts.

Partnership Dissolution Contributing Assets to a Partnership Partners Donald Lewis and Gerald Morton mempunyai saldo modal masing2 $35,000 and $25,000. On June 1, Sharon Nelson bergabung ke partnership dengan menyetor kas $20,000

Partnership Dissolution Contributing Assets to a Partnership June 1 Cash 20 000 00 Sharon Nelson, Capital 20 000 00 For a LLC, Sharon Nelson, Member Equity would have been credited.

Partnership Dissolution Partner Bonuses On March 1, partnership milik Marsha Jenkins dan Helen Kramer admit Alex Diaz as a new partner. Setelah revaluasi saldo modal dari masing2 partner adalah $20,000 and $24,000.

Partnership Dissolution Partner Bonuses Jenkins and Kramer setuju Diaz masuk menjadi Partner baru dengan menyetor Cash $31,000. Diaz akan memperoleh 1/3 kepemilikan Modal partnership yang baru.

Partnership Dissolution Partner Bonuses from New Partner Equity of Jenkins $20,000 Equity of Kramer 24,000 Diaz’s Contribution 31,000 Total equity after admitting Diaz $75,000 Diaz’s interest (1/3 x $75,000) $25,000 Diaz’s contribution $31,000 Diaz’s equity after admission 25,000 Bonus paid to Jenkins and Kramer $ 6,000

Partnership Dissolution Partner Bonuses Mar. 1 Cash 31 000 00 Alex Diaz, Capital 25 000 00 Marsha Jenkins, Capital 3 000 00 Helen Kramer, Capital 3 000 00 $6000 ÷ 2

Partnership Dissolution Partner Bonuses Setelah revaluasi saldo modal Janice Cowen adl $80,000 dan Steve Dodd sebesar $40,000. Ellen Chua masuk menjadi partner baru dengan menyetor kas $30,000 untuk memperoleh ¼ Kepemilikan modal partnership. Pembagian laba-rugi antara Cowen and Dodd adalah dengan ratio 2:1

Partnership Dissolution Partner Bonuses to New Partner Equity of Cowen $ 80,000 Equity of Dodd 40,000 Chua’s Contribution 30,000 Total equity after admitting Chua $150,000 Chua’s interest (1/4 x $150,000) $ 37,500 Chua’s contribution $30,000 Chua’s equity after admission 37,500 Bonus paid to Chua $ 7,500

Partnership Dissolution Partner Bonuses Mar. 1 Cash 30 000 00 Janice Cowen, Capital 5 000 00 Steve Dodd, Capital 2 500 00 Ellen Chua, Capital 37 500 00 2/3 x $7,500 1/3 x $7,500

Liquidating Partnerships When a partnership goes out of business, the winding-up process is called the liquidation of a partnership.

Langkah2 proses Likuidasi Realisasi Non Cash Asset Pembagian Laba/Rugi Realisasi Pelunasan Hutang Pembagian Sisa Kas kepada Partner

Liquidating Partnerships Farley, Greene, and Hall share income and losses in a ratio of 5:3:2. On April 9, after discontinuing operations, the firm had the following trial balance. Cash $11,000 Noncash Assets 64,000 Liabilities $ 9,000 Jean Farley, Capital 22,000 Brad Greene, Capital 22,000 Alice Hall, Capital 22,000 Total $75,000 $75,000

Liquidating Partnerships Gain on Realization Between April 10 and April 30, 2006, Farley, Greene, and Hall sell all noncash assets for $72,000.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of gain +72,000 -64,000 — Left side of statement

Liquidating Partnerships Farley Greene Hall Capital Capital Capital Balance before realization $22,000 $22,000 $22,000 Sale of assets and division of gain +4,000 +2,400 +1,600 $8,000 gain x .50 $8,000 gain x .30 $8,000 gain x .20 Right side of statement

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of gain +72,000 –64,000 — Balance after realization $83,000 $0 $9,000 Left side of statement

Liquidating Partnerships Farley Greene Hall Capital Capital Capital Balance before realization $22,000 $22,000 $22,000 Sale of assets and division of gain +4,000 +2,400 +1,600 Balance after realization $26,000 $24,400 $23,600 Right side of statement

Liquidating Partnerships Gain on Realization The partnership’s liabilities are paid, $9,000.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of gain +72,000 –64,000 — Balance after realization $83,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Left side of statement

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of gain +72,000 –64,000 — Balance after realization $83,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Balance after payment $74,000 $ 0 $ 0 Left side of statement

Liquidating Partnerships Gain on Realization The remaining cash, $74,000, is paid to each partner in accordance with the partner’s capital balance.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of gain +72,000 –64,000 — Balance after realization $83,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Balance after payment $74,000 $ 0 $ 0 Partners’ cash distributed –74,000 — — Final balances $ 0 $ 0 $ 0 Left side of statement

Liquidating Partnerships Balance before realization $22,000 $22,000 $22,000 Farley Greene Hall Capital Capital Capital Sale of assets and division of gain +4,000 +2,400 +1,600 Balance after realization $26,000 $24,400 $23,600 Payment of liabilities — — — Balance after payment $26,000 $24,400 $23,600 Partners’ cash distributed –26,000 –24,400 –23,600 Final balances $ 0 $ 0 $ 0 Right side of statement

Liquidating Partnerships Sale of Assets Apr. 30 Cash 72 000 00 Noncash Assets 64 000 00 Gain on Realization 8 000 00

Liquidating Partnerships Division of Gain Apr. 30 Gain on Realization 8 000 00 Jean Farley, Capital 4 000 00 Brad Greene, Capital 2 400 00 Alice Hall, Capital 1 600 00

Liquidating Partnerships Payment of Liabilities Apr. 30 Liabilities 9 000 00 Cash 9 000 00

Liquidating Partnerships Distribution of Cash to Partners Apr. 30 Jean Farley, Capital 26 000 00 Brad Greene, Capital 24 400 00 Alice Hall, Capital 23 600 00 Cash 74 000 00

Liquidating Partnerships Loss on Realization Between April 10 and April 30, 2006, Farley, Greene, and Hall sell all noncash assets for $44,000.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of loss +44,000 –64,000 — Left side of statement

Liquidating Partnerships Farley Greene Hall Capital Capital Capital Balance before realization $22,000 $22,000 $22,000 Sale of assets and division of loss –10,000 –6,000 –4,000 $20,000 loss x .50 $20,000 loss x .30 $20,000 loss x .20 Right side of statement

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of loss +44,000 –64,000 — Balance after realization $55,000 $0 $9,000 Left side of statement

Liquidating Partnerships Farley Greene Hall Capital Capital Capital Balance before realization $22,000 $22,000 $22,000 Sale of assets and division of loss –10,000 –6,000 –4,000 Balance after realization $12,000 $16,000 $18,000 Right side of statement

Liquidating Partnerships Loss on Realization The liabilities of the partnership are paid, $9,000.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of loss +44,000 –64,000 — Balance after realization $55,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Left side of statement

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of loss +44,000 –64,000 — Balance after realization $55,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Balance after payment $46,000 $ 0 $ 0 Left side of statement

Liquidating Partnerships Loss on Realization The remaining cash, $46,000, is paid to each partner in accordance with the partner’s capital balance.

Liquidating Partnerships Noncash Cash Assets Liabilities Balance before realization $11,000 $64,000 $9,000 Sale of assets and division of loss +44,000 –64,000 — Balance after realization $55,000 $ 0 $9,000 Payment of liabilities –9,000 — –9,000 Balance after payment $46,000 $ 0 $ 0 Partners’ cash distributed –46,000 — — Final balances $ 0 $ 0 $ 0 Left side of statement

Liquidating Partnerships Balance before realization $22,000 $22,000 $22,000 Farley Greene Hall Capital Capital Capital Sale of assets and division of loss –10,000 –6,000 –4,000 Balance after realization $12,000 $16,000 $18,000 Payment of liabilities — — — Balance after payment $12,000 $16,000 $18,000 Partners’ cash distributed –12,000 –16,000 –18,000 Final balances $ 0 $ 0 $ 0 Right side of statement

Liquidating Partnerships Sale of Assets Apr. 30 Cash 44 000 00 Loss on Realization 20 000 00 Noncash Assets 64 000 00

Liquidating Partnerships Division of Loss Apr. 30 Jean Farley, Capital 10 000 00 Brad Greene, Capital 6 000 00 Alice Hall, Capital 4 000 00 Loss on Realization 20 000 00

Liquidating Partnerships Payment of Liabilities Apr. 30 Liabilities 9 000 00 Cash 9 000 00

Liquidating Partnerships Distribution to Partners Apr. 30 Jean Farley, Capital 12 000 00 Brad Greene, Capital 16 000 00 Alice Hall, Capital 18 000 00 Cash 46 000 00

Lifecycle of a Business Business Stage Principal Advantage Form easily: Jacobi forms a business by obtaining a local business license and opening a bank account. Della’s Delights, Proprietorship Jeff Jacobi, Proprietor Della’s Delights, Partnership Jacobi and Lange, Partners Expand capital and expertise: Jacobi admits a new partner that contributes capital and expertise. Continued

Lifecycle of a Business Business Stage Principal Advantage Della’s Delights, LLC Limit legal liability: The partnership is changed to an LLC to limit legal liability of owners. Della’s Delights, Inc. Simplify raising capital: The LLC is changed to a corporation to raise capital from the public. Continued

Lifecycle of a Business Business Stage Principal Advantage Della’s Delights, Inc. a division of International Foods, Inc. Provide exit: The company is sold for cash.

A venture capitalist is an individual or firm that provides equity financing for a new company.

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