Hilliard, Downey, and Petrov are partners sharing income $3$:$2$:$1$. After the firm’s loss from liquidation is distributed, the capital account balances were: Hilliard, $\$24,000$ Dr.; Downey, $\$90,000$ Cr.; and Petrov, $\$64,000$ Cr. If Hilliard is personally bankrupt and unable to pay any of the $\$24,000$, what will be the amount of cash received by Downey and Petrov upon liquidation?

Matthews, Williams, and Shen share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays the liabilities, the balances in the capital accounts are as follows: Matthews, $\$28,000$ Cr.; Williams, $\$62,500$ Cr.; Shen, $\$18,000$ Dr.
What is the amount of cash on hand?

Matthews, Williams, and Shen share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays the liabilities, the balances in the capital accounts are as follows: Matthews, $\$28,000$ Cr.; Williams, $\$62,500$ Cr.; Shen, $\$18,000$ Dr.
What term is applied to the debit balance in Shen’s capital account?

Jason Bradley and Abdul Barak, with capital balances of $\$26,000$ and $\$35,000$, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $\$76,000$ of cash remaining. If the partners share income and losses equally, how should the cash be distributed?

What are the disadvantages of a partnership over a limited liability company form of organization for a profit-making business?

Larson and Alvarez have decided to form a partnership. They have agreed that Larson is to invest $\$150,000$ and that Alvarez is to invest $\$50,000$. Larson is to devote one-half time to the business and Alvarez is to devote full time. The following plans for the division of income are being considered: a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of $12\%$ on original investments and the remainder equally. e. Interest of $12\%$ on original investments, salary allowances of $\$32,000$ to Larson and $\$64,000$ to Alvarez, and the remainder equally.
f. Interest of $12\%$ on original investments, salary allowances of $\$32,000$ to Larson and $\$64,000$ to Alvarez. Alvarez is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances, and the remainder equally.
$\textsf{\textcolor{#4257b2}{Instructions}}$
For each plan, determine the division of the net income under each of the following assumptions: $\left(1\right)$ net income of $\$105,000$ and $\left(2\right)$ net income of $\$180,000$. Present the data in tabular form, using the following columnar headings:

$$\begin{array}{cc} \begin{array}{cc} \hspace{55pt} \begin{array}{c} \bm{\hspace{10pt}\$105,000\hspace{10pt}}\\ \hline \end{array}\ & \hspace{20pt} \begin{array}{c} \bm{\hspace{10pt} \$180,000 \hspace{15pt}}\\ \hline \end{array}\\ \end{array}\\ \begin{array}{ccccc} \textbf{Plan} \hspace{10pt} & \hspace{10pt} \textbf{Larson} \hspace{10pt} & \textbf{Alvarez} \hspace{10pt} & \textbf{Larson} & \hspace{10pt}\textbf{Alvarez}\\ \hline \end{array} \end{array}$$

Brandi Bonds and Cesar Ruiz form a partnership by combining assets of their former businesses. The following balance sheet information is provided by Bonds, sole proprietorship:

$$\begin{array}{lrr} \text{Cash} && \$\hspace{5pt} 40,000\\ \text{Accounts receivable} & \$75,000\\ \text{Less: Allowance for doubtful accounts} & \underline{4,100} & 70,900\\ \text{Land} && 180,000\\ \text{Equipment} & \$70,000\\ \text{Less: Accumulated depreciation\text{\textemdash}equipment} & \underline{43,000} & \underline{27,000}\\ \text{Total assets} && \underline{\underline{\$317,900}}\\ \text{Accounts payable} && \$\hspace{5pt} 22,500\\ \text{Notes payable} && 65,000\\ \text{Brandi Bonds, capital} && \underline{230,400}\\ \text{Total liabilities and owner’s equity} && \underline{\underline{\$317,900}} \end{array}$$

Bonds obtained appraised values for the land and equipment as follows:

$$\begin{array}{lr} \text{Land} & \$250,000\\ \text{Equipment} & 21,000 \end{array}$$

An analysis of the accounts receivable indicated that the allowance for doubtful accounts should be increased to $\$6,000$.
$\hspace{20pt}$ Journalize the partnership’s entry for Bonds’s investment.

Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $\$20,000$ and that Wilkins is to invest $\$30,000$. Drury is to devote full time to the business, and Wilkins is to devote one-half time. The following plans for the division of income are being considered:
a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 10% on original investments and the remainder in the ratio of $3:2$.
e. Interest of $10\%$$34,000$ to Drury and $\$17,000$ to Wilkins, and the remainder equally.
f. Interest of $10\%$ on original investments, salary allowances of $\$34,000$ to Drury and $\$17,000$ to Wilkins, Drury is also to be allowed a bonus equal to $20\%$ of the amount by which net income exceeds the salary allowances. The remainder equally.
$\textsf{\textcolor{#4257b2}{Instructions}}$
For each plan, determine the division of the net income under each of the following assumptions: $\left(1\right)$ net income of $\$150,000$ and $\left(2\right)$ net income of $\$66,000$. Present the data in tabular form, using the following columnar headings:

$$\begin{array}{cc} \begin{array}{cc} \hspace{55pt} \begin{array}{c} \bm{\hspace{10pt}\$150,000\hspace{10pt}}\\ \hline \end{array}\ & \hspace{10pt} \begin{array}{c} \bm{\hspace{15pt} \$66,000 \hspace{15pt}}\\ \hline \end{array}\\ \end{array}\\ \begin{array}{ccccc} \textbf{Plan} \hspace{10pt} & \hspace{10pt} \textbf{Drury} \hspace{10pt} & \textbf{Wilkins} \hspace{10pt} & \textbf{Drury} & \hspace{10pt}\textbf{Wilkins}\\ \hline \end{array} \end{array}$$

What are the main advantages of limited liability companies?

What are the main advantages of partnerships?

Jen Hall contributed a patent, accounts receivable, and $\$22,000$ cash to a partnership. The patent had a book value of $\$56,000$. However, the technology covered by the patent appeared to have significant market potential. Thus, the patent was appraised at $\$150,000$. The accounts receivable control account was $\$32,000$, with an allowance for doubtful accounts of $\$2,000$. The partnership also assumed a $\$12,000$ account payable from Hall.
$\hspace{20pt}$Provide the journal entry for Hall’s contribution to the partnership.

Josh Beach contributed land, inventory, and $\$24,000$ cash to a partnership. The land had a book value of $\$65,000$ and a market value of $\$114,000$. The inventory had a book value of $\$60,000$ and a market value of $\$56,000$. The partnership also assumed a $\$50,000$ note payable owed by Beach that was used originally to purchase the land.
$\hspace{20pt}$ Provide the journal entry for Beach’s contribution to the partnership.

What are the main advantages of proprietorships?

Pryor and Lester are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $\$12,000$ and $\$8,000$, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $\$16,000$.
How should the cash be divided between Pryor and Lester?