Click to edit Master title style
1
1
Adeng Pustikaningsih, M.Si.
Dosen Jurusan Pendidikan Akuntansi
Fakultas Ekonomi
Universitas Negeri Yogyakarta
CP: 08 222 180 1695
Email : [email protected]
Click to edit Master title style
2
2
2
Accounting for Partnerships
12
Click to edit Master title style
3
3
3
1. Describe the basic characteristics of
proprietorships, partnerships, and
limited liability companies.
2. Describe and illustrate the accounting
for forming a partnership and for
dividing the net income and net loss
of a partnership.
After studying this chapter, you should
be able to:
Click to edit Master title style
4
4
4
3. Describe and illustrate the accounting
for partner admission and withdrawal.
4. Describe and illustrate the accounting
for liquidating a partnership.
5. Prepare the statement of partnership
equity.
After studying this chapter, you should
be able to:
Click to edit Master title style
5
5
5
Describe the basic
characteristics of
proprietorships,
partnerships, and limited
liability companies.
Objective 1
12-1
Click to edit Master title style
6
6
6
Advantages
• Simple to form
• Ability to be one’s own
boss
Disadvantages
• Difficulty in raising
large amounts of capital
• Unlimited liability
12-1
A proprietorship is a business
enterprise owned by a single individual.
Proprietorship
Click to edit Master title style
7
7
7
A partnership is an association of
two or more individuals who own
and manage a business for profit.
Advantages
• More financial
resources than a
proprietorship
• Additional
management skills
Disadvantages
• Limited life
• Unlimited liability
• Co-ownership of
partnership property
• Mutual agency
12-1 Partnership
Click to edit Master title style
8
8
8
An important right of partners is to
participate in the income of the
partnership.
12-1
A partnership, like a proprietorship, is a
nontaxable entity.
A partnership is created by a contract,
known as the partnership agreement or
articles of partnership.
Partnership
Click to edit Master title style
9
9
9
In Indonesia, Limited Partnership is called CV
(Commonditaire vennootschap). CV is a
partnership consisting of one or more (active
partner) and one or more silent partner (or
passive partner). Example = CV Cemara
Group Indonesia in Medan that sells palm oil,
coconut, and spices.
CV (Commonditaire Vennootschap) 12-1
Click to edit Master title style
10
10
10
Firma is another common form of partnership
in Indonesia. Firma or abbreviated as Fa is
widely used for professional firm such as law
firm or accounting firm. The example of a
accounting firm is KAP Purwantono, Sarwoko
and Sandjaja, and accounting firm affiliated
with Ernst and Young which is about 17
partners in the firm.
Firma 12-1
Click to edit Master title style
11
11
11
10
Ease of Formation
Proprietorship Simple
Partnership Moderate
CV and Firma Moderate
Characteristics of
Proprietorships, Partnerships,
and CV and firma
12-1 2
Click to edit Master title style
12
12
12
11
12-1
Legal Liability
Proprietorship No limitation
Partnership No limitation
CV and Firma Limited liability
Characteristics of
Proprietorships, Partnerships, CV
and Firma
2
Click to edit Master title style
13
13
13
12
12-1
Taxation
Proprietorship Nontaxable*
Partnership Nontaxable*
CV and Firma Nontaxable**
*Pass-through entity
**Pass-through entity by election
Characteristics of
Proprietorships, Partnerships, CV
and Firma
2
Click to edit Master title style
14
14
14
13
12-1
Limitation on Life of Entity
Proprietorship Yes
Partnership Yes
CV and Firma Yes
Characteristics of
Proprietorships, Partnerships, CV
and Firma
2
Click to edit Master title style
15
15
15
14
12-1
Access to Capital
Proprietorship Limited
Partnership Limited
CV and Firma Limited
Characteristics of
Proprietorships, Partnerships, CV
and Firma
2
Click to edit Master title style
16
16
16
Describe and illustrate the
accounting for forming a
partnership and for dividing
the net income and net loss
of a partnership.
Objective 2
12-2
Click to edit Master title style
17
17
17
Forming a Partnership 12-2
Joko Suhendro and Endang Fauzi agree to
combine their hardware businesses in a
partnership. Each is to contribute certain
amounts of cash and other assets. They
also agree that the partnership is to assume
the liabilities of the separate businesses.
Click to edit Master title style
18
18
18
17
Joko’ Transfer of Assets, Liability, and Equity
12-2
Apr. 1 Cash 7 200 000
Accounts Receivable 16 300 000
Merchandise Inventory 28 700 000
Store Equipment 5 400 000
Office Equipment 1 500 000
Allowance for Doubtful Accounts 1 500 000
Accounts Payable 2 600 000
Joko Suhendro, Capital 55 000 000
Click to edit Master title style
19
19
19
A similar entry would record the assets
contributed and the liabilities
transferred by Fauzi. In each entry, the
noncash assets are recorded at values
agreed upon by the partners. These
values normally represent current
market values.
12-2
Click to edit Master title style
20
20
20
19
Example Exercise 12-1
12-2
Riana Hasibuan contributed equipment, inventory, and
Rp34,000,000 cash to a partnership. The equipment had a
book value of Rp23,000,000 and market value of
Rp29,000,000. The inventory had a book value of
Rp60,000,000 but only had a market value of
Rp15,000,000 due to obsolescence. The partnership also
assumed a Rp12,000,000 note payable owed by Howell
that was used originally to purchase the equipment.
Provide the journal entry for Hasibuan’s contribution to
the partnership.
Click to edit Master title style
21
21
21
20 For Practice: PE 12-1A, PE 12-1B
Follow My Example 12-1
12-2
Cash 34,000,000
Inventory 15,000,000
Equipment 29,000,000
Notes Payable 12,000,000
Riana Hasibuan, Capital 66,000,000
Click to edit Master title style
22
22
22
The partnership agreement of Jamila Sari and
Chandra Mono provides for Sari to receive a
monthly allowance of Rp 5,000,000 (Rp
60,000,000 annually) and Mono is to receive
Rp 4,000,000 a month (Rp 48,000,000
annually). If there is any remaining net
income, it is to be divided equally. The firm
had a net income of Rp 150,000,000 for the
year.
Dividing Income—Services of
Partners
12-2
Click to edit Master title style
23
23
23
22
J. Sari C. Mono Total Annual salary allowance Rp 60,000,000 Rp48,000,000 Rp 108,000,000
Remaining income 21,000,000 21,000,000 42,000,000
Division of net income Rp 81,000,000 Rp69,000,000 Rp 150,000,000
12-2 Division of Net Income
to journal entry
(Slide 24)
Click to edit Master title style
24
24
24
23
12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary 150 000 000
Jamila Sari, Capital 81 000 000
Chandra Mono, Capital 69 000 000
Click to edit Master title style
25
25
25
12-2 Dividing Income—Services of
Partners and Investments
The partnership agreement for Sari and Mono
divides income as follows:
1. Monthly salary allowance of Rp 5,000,000 for
Stone and Rp 4,000,000 for Mills.
2. Interest of 12% on each partner’s capital
balance on January 1.
3. If there is any remaining net income, it is to be
divided equally between the partners.
Click to edit Master title style
26
26
26
25
Division of Net Income
Salary allowance Rp60,000,000 Rp48,000,000 Rp108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
12-2
Net income of Rp 150,000,000 is divided.
J. Sari C. Mono Total
Click to edit Master title style
27
27
27
26
Division of Net Income
Salary allowance Rp 60,000,000 Rp 48,000,000 Rp108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
12-2
12% x Sari’s
capital account
balance on Jan. 1 of
Rp 160,000,000
J. Sari C. Mills Total
Net income of Rp 150,000,000 is divided.
Click to edit Master title style
28
28
28
27
Division of Net Income
J. Sari C. Mono Total Salary allowance Rp 60,000,000 Rp 48,000,000 Rp 108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
12-2
12% x Mono’s
capital account
balance on Jan. 1 of
Rp120,000,000
Net income of Rp 150,000,000 is divided.
Click to edit Master title style
29
29
29
28
Division of Net Income 12-2
J. Sari C. Mono Total
Salary allowance Rp 60,000,000 Rp48,000,000 Rp108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
Remaining income 4,200,000 4,200,000 8,400,000
Division of net income Rp 83,400,000 Rp66,600,000 Rp150,000,000
Net income of Rp 150,000,000 is divided.
Click to edit Master title style
30
30
30
29
12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary 150 000 00
Jamila Sari, Capital 83 400 00
Chandra Mono, Capital 66 600 00
Click to edit Master title style
31
31
31
30
12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary 150 000 00
Jamila Sari, Member Equity 83 400 00
Chandra Mono, Member Equity 66 600 00
Partnership Alternative
Click to edit Master title style
32
32
32
Assume the same facts as
before except that the net
income is only
Rp100,000,000.
12-2 Dividing Income—Allowances
Exceed Net Income
Click to edit Master title style
33
33
33
32
12-2 Division of Net Income
J. Sari C. Mono Total
Salary allowance Rp60,000,000 Rp48,000,000 Rp108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
Total Rp79,200,000 Rp62,400,000 Rp141,600,000
Net income of Rp100,000,000 is divided.
This amount exceeds net
income by
Rp41,600,000.
Click to edit Master title style
34
34
34
33
12-2 Division of Net Income
J.Sari C. Mono Total Salary allowance Rp60,000,000 Rp48,000,000 Rp108,000,000
Interest allowance 19,200,000 14,400,000 33,600,000
Total Rp79,200,000 Rp62,400,000 Rp141,600,000
Deduct excess of
allowance over income 20,800,000 20,800,000 <41,600,000>
Net income Rp58,400,000 Rp41,600,000 Rp100,000,000
Net income of Rp100,000,000 is
divided.
Click to edit Master title style
35
35
35
34
Example Exercise 12-2
12-2
Steven Pamungkas and Cinta Bimantara formed a
partnership, dividing income as follows:
1. Annual salary allowance to Prince of Rp42,000,000.
2. Interest of 9% on each partner’s capital balance on
January 1.
3. Any remaining net income divided equally.
Pamungkas and Bimantara had Rp20,000,000 and
Rp150,000,000 in their January 1 capital balances,
respectively. Net income for the year was Rp240,000,000.
How much net income should be distributed to Pamungkas?
Click to edit Master title style
36
36
36
35 For Practice: PE 12-2A, PE 12-2B
Follow My Example 12-2
12-2
Monthly salary Rp 42,000,000
Interest (9% x Rp20,000,000) 1,800,000
Remaining income 91,350,000*
Total distributed to Pamungkas Rp135,150,000
*(Rp240,000,000 – Rp42,000,000 – Rp1,800,000 –
Rp13,500,000) x 50%
Click to edit Master title style
37
37
37
Describe and illustrate
the accounting for
partner admission
and withdrawal.
Objective 3
12-3
Click to edit Master title style
38
38
38
1. Purchasing an interest from one or more
of the current partners.
2. Contributing assets to the partnership.
A person may be admitted to a partnership
only with the consent of all the current
partners by:
12-3 Admitting a Partner
Click to edit Master title style
39
39
39
Partners Toni Asikin and Nani Bunga
have capital balances of
Rp50,000,000 each. On June 1, each
sells one-fifth of his equity to Joko
Cahyadi for Rp10,000,000 in cash.
12-3 Purchasing an Interest in a
Partnership
Click to edit Master title style
40
40
40
39
12-3
The only entry required in the partnership
accounts is as follows:
June 1 Toni Asikin, Capital 10 000 000
Nani Bunga, Capital 10 000 000
Joko Cahyadi, Capital 20 000 000
Click to edit Master title style
41
41
41
12-3
The effect of the transaction on the partnership
accounts is presented in the following diagram:
Partnership Accounts
Asikin, Capital 10,000,000
Bunga, Capital 10,000,000
50,000,000
50,000,000
Cahyadi, Capital 20,000,000
40
Click to edit Master title style
42
42
42
12-3 Contributing Assets to a
Partnership
Partners Dudi Lintang and Guntur
Margono have capital balances of
Rp35,000,000 and Rp25,000,000
respectively. On June 1, Suci Nadera
joins the partnership by permission and
makes an investment of Rp20,000,000
cash.
Click to edit Master title style
43
43
43
43
12-3
June 1 Cash 20 000 000
Suci Nadera, Capital 20 000 000
The entry to record this transaction is as follows:
Click to edit Master title style
44
44
44
44
12-3
The effect of the transaction on the partnership
accounts is presented in the following diagram:
Partnership Accounts
Nadera, Capital
Lintang, Capital 35,000,000
Margono, Capital 25,000,000
Net Assets
60,000,000
20,000,000
20,000,000
Click to edit Master title style
45
45
45
12-3 LLC Alternative
June 1 Cash 20 000 000
Suci Nadera, Member Equity 20 000 000
45
Click to edit Master title style
46
46
46
12-3 Revaluation of Assets
If the asset accounts do not reflect
approximate current market values
when a new partner is admitted, the
accounts should be adjusted
(increased or decreased) before the
new partner is admitted.
Click to edit Master title style
47
47
47
Partners Dudi Lintang and Guntur
Margono have capital balances of
Rp35,000,000 and Rp25,000,000
respectively. The balance in
Merchandise Inventory is Rp14,000,000
and the current replacement value is
Rp17,000,000. The partners share net
income equally.
12-3
Click to edit Master title style
48
48
48
48
June 1 Merchandise Inventory 3 000 000
Dudi Lintang, Capital 1 500 000
Guntur Margono, Capital 1 500 000
Because the LLC alternative follows a pattern of
replacing “Capital” with “Member Equity,” the
LLC entry will not be shown again.
12-3
The revaluation is recorded as follows:
Click to edit Master title style
49
49
49
49
Example Exercise 12-3
12-3
Budi Nadera invested Rp45,000,000 in the Lestari & Kulsum
partnership for ownership equity of Rp45,000,000. Prior to
the investment land was revalued to a market value of
Rp260,000,000 from a book value of Rp200,000,000. Lila
Lestari and Tami Kulsum share net income in a 1:2 ratio.
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Nadera.
Click to edit Master title style
50
50
50
50 For Practice: PE 12-3A, PE 12-3B
Follow My Example 12-3
12-3
b. Cash 45,000,000
Budi Nadera, Capital 45,000,000
a. Land 60,000,000
Lila Lestari, Capital 20,000,000¹
Tami Kulsum, Capital 40,000,000² ¹Rp60,000,000 x l/3
²Rp60,000,000 x 2/3
Click to edit Master title style
51
51
51
12-3
51
Click to edit Master title style
52
52
52
On March 1, the partnership of Maryanti
Juwita and Heni Kurniasari admit Arif Dunia
as a new partner. The assets of the old
partnership are adjusted to current market
values and the resulting capital balances for
Juwita and Kurniasari are Rp20,000,000 and
Rp24,000,000 respectively.
12-3 Partner Bonuses
Click to edit Master title style
53
53
53
Juwita and Kurniasari agree to admit
Dunia as a partner for Rp31,000,000.
In return, Dunia will receive a one-
third equity in the partnership and
will share income and losses equally
with Juwita and Kurniasari.
12-3
Click to edit Master title style
54
54
54
54
Equity of Juwita Rp20,000,000
Equity of Kurniasari 24,000,000
Dunia’s Contribution 31,000,000
Total equity after admitting Dunia Rp75,000,000
Dunia’s interest (1/3 x $75,000) Rp25,000,000
Dunia’s contribution Rp31,000,000
Dunia’s equity after admission 25,000,000
Bonus paid to Juwita and Kurniasari Rp 6,000,000
12-3
Click to edit Master title style
55
55
55
55
Mar. 1 Cash 31 000 000
Arif Dunia, Capital 25 000 000
Maryanti Juwita, Capital 3 000 000
Heni Kurniasari, Capital 3 000 000
The entry to record the admission of Dunia to
the partnership is as follows:
12-3
Rp6,000,000/2
Click to edit Master title style
56
56
56
After adjusting the market values, the capital
balance of Juwita Cahyani is Rp80,000,000 and the
capital balance of Sri Darmawan is Rp40,000,000.
Elisa Chairunisa receives a one-fourth interest in
the partnership for a contribution of Rp30,000,000.
Before admitting Chairunisa, Cahyani and
Darmawan shared net income using a 2:1 ratio.
12-3 Adjusting for New Partner’s
Unique Qualities or Skills
Click to edit Master title style
57
57
57
57
Equity of Cahyani Rp 80,000,000
Equity of Darmawan 40,000,000
Chairunisa’s Contribution 30,000,000
Total equity after admitting Chairunisa Rp150,000,000
Chairunisa’s equity interest after admission x 25%
Chairunisa’s equity after admission Rp 37,500,000
Chairunisa’s contribution 30,000,000
Bonus paid to Chairunisa Rp 7,500,000
The bonus is computed as follows:
12-3
Click to edit Master title style
58
58
58
58
June 1 Cash 30 000 000
Juwita Cahyani, Capital 5 000 000
Sri Darmawan, Capital 2 500 000
Elisa Chairunisa, Capital 37 500 000
12-3
The entry to record the bonus and admission of
Chairunisa to the partnership is as follows:
Click to edit Master title style
59
59
59
59
12-3
The entry to record the bonus and admission of
Chou to the partnership is as follows:
June 1 Cash 30 000 000
Juwita Cahyani, Capital 5 000 000
Sri Darmawan, Capital 2 500 000
Elisa Chairunisa, Capital 37 500 000
2/3
xRp7,500,00
0
Click to edit Master title style
60
60
60
60
12-3
The entry to record the bonus and admission of
Chou to the partnership is as follows:
June 1 Cash 30 000 000
Juwita Cahyani, Capital 5 000 000
Sri Darmawan, Capital 2 500 000
Elisa Chairunisa, Capital 37 500 000
1/3 x
Rp7,500,000
Click to edit Master title style
61
61
61
12-3 Withdrawal of a Partner
On June 1, the partnership of X, Y, and Z
have capital balances of Rp50,000,000,
Rp80,000,000, and Rp30,000,000,
respectively. Z decides to retire from the
partnership and sells his interest to Y for
Rp35,000,000.
Click to edit Master title style
62
62
62
12-3
The following entry is required to record Z selling
his interest to Y.
June 1 Z, Capital 30 000 000
Y, Capital 30 000 000
Transfer ownership
from Z to Y.
62
The amount paid to Y by Z has no impact on the
partnership’s accounting records.
Click to edit Master title style
63
63
63
12-3
If Z had sold his interest
directly to the partnership, both
the assets and the owner’s
equity of the partnership would
have been reduced.
Click to edit Master title style
64
64
64
64
Example Exercise 12-4
12-3
Luki has a capital balance of Rp45,000,000 after
adjusting assets to fair market value. Cindy
contributes Rp26,000,000 to receive a 30% interest
in a new partnership with Luki.
Determine the amount and recipient of the partner
bonus.
Click to edit Master title style
65
65
65
65 For Practice: PE 12-4A, PE 12-4B
Follow My Example 12-4
12-3
Equity of Luki Rp45,000,000
Cindy contribution 26,000,000
Total equity after admitting Cindy Rp71,000,000
Cindy’s equity interest x 30%
Cindy’s equity after admission Rp21,300,000
Cindy’s contribution Rp26,000,000
Cindy’s equity after admission 21,300,000
Bonus paid to Luki Rp 4,700,000
Click to edit Master title style
66
66
66
Describe and illustrate
the accounting for
liquidating a
partnership.
Objective 4
12-4
Click to edit Master title style
67
67
67
When a partnership goes out
of business, the winding-up
process is called the
liquidation of a partnership.
12-4 Liquidating Partnerships
Click to edit Master title style
68
68
68
12-4 Liquidation Process
1. Sell the partnership assets. This step is called
realization.
2. Distribute any gains or losses from realization
to the partners based upon their income-
sharing ratio.
3. Pay the claims of creditors using the cash from
step 1 realization.
4. After satisfying the creditors, distribute the
remaining cash to the partners based on the
balances in their capital accounts.
Click to edit Master title style
69
69
69
69
12-4
Click to edit Master title style
70
70
70
Cash Rp11,000,000
Noncash Assets 64,000,000
Liabilities Rp 9,000,000
Juju Febriani, Capital 22,000,000
Bayu Gilang, Capital 22,000,000
Anggi Hasanah, Capital 22,000,000
Total Rp75,000,000 Rp75,000,000
12-4 Liquidation Process
Febriani, Gilang, and Hasanah share income and losses
in a ratio of 5:3:2. On April 9, after discontinuing
operations, the firm had the following trial balance.
Click to edit Master title style
71
71
71
Between April 10 and April 30, 2006,
Febriani, Gilang, and Hasanah sell all
noncash assets for Rp72,000,000.
Thus, a gain of Rp8,000,000
(Rp72,000,000 – Rp64,000,000) is
realized.
12-4 Liquidation Process
Click to edit Master title style
72
72
72
Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000
Sale of assets and division of gain +72 000 000 -64 000 000 0 4 000 000 2 400 000 1 600 000
Balances after realization Rp83 000 000 Rp 0 Rp9 000 000 Rp26 000 000 Rp24 400 000 Rp23 600 000
Payment of liabilities -9 000 000 0 -9 000 000 0 0 0
Balances after payment of liabilities Rp74 000 000 Rp 0 Rp 0 Rp26 000 000 Rp24 400 000 Rp23 600 000
Cash distributed to partners -74 000 000 0 0 -26 000 000 -24 400 000 -23 600 000
Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0
Cash +
Noncash
Assets = Liabilities +
Capital
Febriani
(50%) +
Gilang
(30%) +
Hasanah
(20%)
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Gain on Realization 12-4
Gain Rp8,000,000
Click to edit Master title style
73
73
73
73
Cash 72 000 000
Noncash Assets 64 000 000
Gain on Realization 8 000 000
12-4
Step 1: Sale of assets
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
74
74
74
74
Gain on Realization 8 000 000
Juju Febriani, Capital 4 000 000
Bayu Gilang, Capital 2 400 000
Anggi Hasanah, Capital 1 600 000
12-4
Step 2: Division of gain
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
75
75
75
75
Liabilities 9 000 00
Cash 9 000 00
12-4
Step 3: Payment of liabilities
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
76
76
76
76
Juju Febriani, Capital 26 000 000
Bayu Gilang, Capital 24 400 000
Anggi Hasanah, Capital 23 600 000
Cash 74 000 000
12-4
Step 4: Distribution of cash to partners
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
77
77
77
Febriani, Gilang, and Hasanah
sell all noncash assets for
Rp44,000,000. A loss of
Rp20,000,000 (Rp64,000,000 –
Rp44,000,000) is realized.
12-4 Loss on Realization
Click to edit Master title style
78
78
78
78
Cash 44 000 000
Loss on Realization 20 000 000
Noncash Assets 64 000 000
12-4
Step 1: Sale of assets
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
79
79
79
Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000
Sale of assets and division of gain +44 000 000 -64 000 000 0 -10 000 000 -6 000 000 -4 000 000
Balances after realization Rp55 000 000 Rp 0 Rp9 000 000 Rp12 000 000 Rp16 000 000 Rp18 000 000
Payment of liabilities -9 000 000 0 -9 000 000 0 0 0
Balances after payment of liabilities Rp46 000 000 Rp 0 Rp 0 Rp12 000 000 Rp16 000 000 Rp18 000 000
Cash distributed to partners -46 000 000 0 0 -12 000 000 -16 000 000 -18 000 000
Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Liabilities +
Capital
Febriani
(50%) +
Gilang
(30%) +
Hasanah
(20%)Cash +
Noncash
Assets =
Loss on Realization 12-4
Rp20,000,000 Loss
Click to edit Master title style
80
80
80
80
Juju Febriani, Capital 10 000 000
Bayu Gilang, Capital 6 000 000
Anggi Hasanah, Capital 4 000 000
Loss on Realization 20 000 000
12-4
Step 2: Division of loss
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
81
81
81
81
Liabilities 9 000 000
Cash 9 000 000
12-4
Step 3: Payment of liabilities
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
82
82
82
82
Juju Febriani, Capital 12 000 000
Bayu Gilang, Capital 16 000 000
Anggi Hasanah, Capital 18 000 000
Cash 46 000 000
12-4
Step 4: Distribution of cash to partners:
Entries to Record the Steps in the
Liquidation Process
Click to edit Master title style
83
83
83
83
Example Exercise 12-5
12-4
Prior to liquidating their partnership, Toni and
Gendis had capital accounts of Rp50,000,000 and
Rp100,000,000, respectively. The partnership assets
were sold for Rp220,000,000. The partnership had
Rp20,000,000 of liabilities. Toni and Gendis share
income and losses equally. Determine the amount
received by Gendis as a final distribution from
liquidation of the partnership.
Click to edit Master title style
84
84
84
84 For Practice: PE 12-5A, PE 12-5B
Follow My Example 12-5
12-4
Gendis’s equity prior to liquidation Rp100,000,000
Realization of asset sale Rp220,000,000
Book value of assets (Rp50,000,000 +
Rp100,000,000 + Rp20,000,000) 170,000,000
Gain on liquidation Rp50,000,000
Gendis’s share of gain (50% x
Rp50,000,000) 25,000,000
Gentry’s cash distribution Rp125,000,000
Click to edit Master title style
85
85
85
12-4 Loss on Realization—Capital
Deficiency
Febriani, Gilang, and Hasanah sell all of the
noncash assets for Rp10,000,000. A loss of
Rp54,000,000 (Rp64,000,000 – Rp10,000,000)
is realized. The share of the loss allocated to
Febriani, Rp27,000,000 (50% of
Rp54,000,000), exceeds the Rp22,000,000
balance in her capital account. Febriani
contributes Rp5,000,000 to the partnership.
Click to edit Master title style
86
86
86
Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000
Sale of assets and division of gain +10 000 000 -64 000 000 0 -27 000 000 -16 200 000 -10 800 000
Balances after realization Rp21 000 000 Rp 0 Rp9 000 000 Rp(5 000 000) Rp5 800 000 Rp11 200 000
Payment of liabilities -9 000 000 0 -9 000 000 0 0 0
Balances after payment of liabilities Rp12 000 000 Rp 0 Rp 0 Rp(5 000 000) Rp5 800 000 Rp11 200 000
Receipt of Deficiency 5 000 000 0 0 5 000 000 0 0
Balances Rp17 000 000 Rp 0 Rp 0 Rp 0 Rp5 800 000 Rp11 200 000
Cash distributed to partners -17 000 000 0 0 0 -5 800 000 -11 200 000
Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Liabilities +
Capital
Febriani
(50%) +
Gilang
(30%) +
Hasanah
(20%)Cash +
Noncash
Assets =
Loss on Realization—
Capital Deficiency
12-4
Febriani’s Contribution
Click to edit Master title style
87
87
87
87
12-4
Cash 10 000 000
Loss on Realization 54 000 000
Noncash Assets 64 000 000
Step 1: Sale of assets
Click to edit Master title style
88
88
88
88
Juju Febriani, Capital 27 000 000
Bayu Gilang, Capital 16 200 000
Anggi Hasanah, Capital 10 800 000
Loss on Realization 54 000 000
Step: Payment of liabilities
12-4
Click to edit Master title style
89
89
89
89
Step 3: Payment of liabilities
12-4
Liabilities 9 000 000
Cash 9 000 000
Click to edit Master title style
90
90
90
90
12-4
Receipt of deficiency
Cash 5 000 000
Juju Febriani, Capital 5 000 000
Having the partner with a deficiency pay all or part of
the deficiency is not one of the four liquidation steps,
but it should make the other partners happy.
Click to edit Master title style
91
91
91
Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000
Sale of assets and division of gain +10 000 000 -64 000 000 0 -27 000 000 -16 200 000 -10 800 000
Balances after realization Rp21 000 000 Rp 0 Rp9 000 000 Rp(5 000 000) Rp5 800 000 Rp11 200 000
Payment of liabilities -9 000 000 0 -9 000 000 0 0 0
Balances after payment of liabilities Rp12 000 000 Rp 0 Rp 0 Rp(5 000 000) Rp5 800 000 Rp11 200 000
Receipt of Deficiency 5 000 000 0 0 5 000 000 0 0
Balances Rp17 000 000 Rp 0 Rp 0 Rp 0 Rp5 800 000 Rp11 200 000
Cash distributed to partners -17 000 000 0 0 0 -5 800 000 -11 200 000
Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Liabilities +
Capital
Febriani
(50%) +
Gilang
(30%) +
Hasanah
(20%)Cash +
Noncash
Assets =
Loss on Realization—
Capital Deficiency
12-4
The remaining cash is distributed. Gilang receives
Rp5,800,000 and Hasanah receives Rp11,200,000.
Click to edit Master title style
92
92
92
92
Bayu Gilang, Capital 5 800 000
Anggi Hasanah, Capital 11 200 000
Cash 17 000 000
12-4
Distribution of cash to partners:
Click to edit Master title style
93
93
93
93
Example Exercise 12-6
12-4
Prior to liquidating their partnership, Sundari and
Baskoro had capital accounts of Rp20,000,000 and
Rp80,000,000, respectively. The partnership assets
were sold for Rp40,000,000. The partnership had
no liabilities. Sundari and Baskoro share income
and losses equally. a. Determine the amount of Sundari’s deficiency
b. Determine the amount distributed to Baskoro
assuming Sundari is unable to satisfy the
deficiency.
Click to edit Master title style
94
94
94
94
For Practice: PE 12-6A, PE 12-6B
Follow My Example 12-6
12-4
a. Sundari’s equity prior to liquidation Rp 20,000,000
Realization of asset sales Rp 40,000,000
Book value of assets 100,000,000
Loss on liquidation Rp 60,000,000
Sundari’s share of loss (50% x
Rp60,000,000) 30,000,000
Sundari’s deficiency Rp(10,000,000)
b. Rp40,000,000 Rp80,000,000 – Rp30,000,000 share
of loss – Rp10,000,000. Sundari’s
deficiency also equals the amount
realized from asset sales.
Click to edit Master title style
95
95
95
Prepare the
statement of
partnership equity.
Objective 5
12-5
Click to edit Master title style
96
96
96
12-5 Statement of Partnership Equity
The change in the owners’
capital accounts for a period of
time is reported in a statement
of partnership equity.
Click to edit Master title style
97
97
97
Balance, January 1, 2008 Rp 245 000 000 Rp 365 000 000 Rp 610 000 000
Capital additions 50 000 000 000 000 50 000 000
Net income for the year 40 000 000 80 000 000 120 000 000
Less partner withdrawals (5 000 000) (45 000 000) (50 000 000)
Balance, December 31, 2008 Rp 330 000 000 Rp4 000 000 000 Rp 730 000 000
Chandra
capital
Investors Associates
Statement of Partnership Equity
For the Year Ended december 31, 2008Deny
Kiranti,
Capital
Total
Partnership
Capital
Statement of
Partnership Equity
12-5
Click to edit Master title style
98
98
98
99
Financial Analysis and Interpretation
KAP Shaleh & Banu had the following information
for the last two years: 2008 2007
Revenues Rp220,000,000,000 Rp180,000,000,000
Number of employees 160 150
Revenue per
employee, 2008 = Rp220,000,000,000
160 = Rp137,500,000
Revenue per
employee, 2007 = Rp180,000,000,000
150 = Rp120,000,000
12-5
Click to edit Master title style
99
99
99
Financial Analysis and Interpretation 12-5
The revenues per employee
showed improvement in 2008.
Thus, each employee is producing
more revenues in 2008, than in
2007, which may indicate
improved productivity. Overall, it
appears the firm is properly
managing the growth in staff.