Chapter 12 Instructor Solutions Manual

CHAPTER 12 Accounting for Partnerships, Instructor Solutions Manual, Searchable 62 page pdf
ACCOUNTING FOR PARTNERSHIPS, COMPREHENSIVE PROBLEM SOLUTION
Examples:
STARRITE CO.
THE STOOGES PARTNERSHIP
THE BEST COMPANY
PASA COMPANY
CNU COMPANY
JOHN CALVIN COMPANY
KAT COMPANY
The written partnership agreement, often referred to as the articles of
co-partnership, is needed. It should contain such basic information as
the name and principal location of the firm, the purpose of the business,
and date of inception. In addition, the following should be specified:
(1) names and capital contributions of partners, (2) rights and duties of
partners, (3) basis for sharing net income or net loss, (4) provision for
withdrawals of assets, (5) procedures for submitting disputes to arbitration,
(6) procedures for the withdrawal or addition of a partner, and (7) rights
and duties of surviving partners in the event of a partner’s death.
Provision for withdrawals of assets. There are two kinds of withdrawals:
one is called drawings; the other is called a withdrawal of capital. The
former relates to providing each partner with cash for normal living
expenses. You may provide for periodic drawings of a fixed amount such
as $1,000 a month, or an amount not to exceed a specified amount
such as $1,500 or $2,000. Withdrawals of capital can affect the future
of the partnership. Thus, you may want to provide for consultation with
an attorney, a financial advisor, and/or a CPA and a formal approval
procedure.


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