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. #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.

Station #1: Establishing Solutions #1: Cash135,000 Frank, Capital45,000 Dean, Capital45,000 Sammy, Capital45,000 #2 Cash60,000 Ben, Capital30,000 Glen, Capital20,000 Ken, Capital10,000 #3 Cash31,000 Auto9,000 Land50,000 Ron, Capital50,000 Don, Capital 1,000 Jon, Capital39,000

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, $ and $ 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 $ in the business for a 15% share, with the bonus going to the existing owners.

Station #2: Adding (Bonus to Old) Solutions

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

Station #3: Adding (Bonus to New) Solutions

#1 Orr, Hull and Howe are partners with capital balances of $50 000, $ 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 $ from partnership assets, with the bonus to the remaining partners. Station #4: W/D (Bonus to Remaining) Questions

Orr, Capital50000 Hull, Capital (10000 x 4/9) 4444 Howe, Capital (10000 x 5/9) 5556 Cash Station #4: W/D (Bonus to Remaining) Solutions

1.Petters, Minute and Regan are partners, sharing profits at the rates of 60%, 20% and 10%, respectively. Regan, who has $ 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 $ with the bonus to the departing partner. Station #5: W/D (Bonus to Leaving) Questions

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

1. Haney, Koolen and Wallen are partners with capital balances of $ , $ and $ 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 $ Show the entry to allocate the gain to the partners and the entry to dissolve the business. Station #6: Dissolution Questions

Station #6: Dissolution Solutions

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

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

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

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. Station #8: Theory Solutions