| Assets | Liabilities | ||
| Plant and Equipment | $20,000.00 | Notes Payable | $ 6,000.00 |
| Office Furniture | 2,000.00 | Accounts Payable | 17,000.00 |
| Inventory, Material | 12,000.00 | Norton, Loans | 5,000.00 |
| Notes Receivable | 5,000.00 | Brown, Loans | 3,000.00 |
| Cash | 3,000.00 | Brown, Capital | 15,000.00 |
| $71,000.00 | $71,000.00 | ||
Profits and losses were shared three-fourths by Norton and one-fourth by Brown. Interest was allowed on the loan accounts but not on the capital accounts. At the end of the first month, April 30, it was found that material inventoried at $5,000 had produced $3,600; accounts receivable to the amount of $15,000 had been collected in cash and $2,800 in bad debts charged off; notes receivable collected in cash $2,000; expenses of $600 had been paid in cash; equipment valued at $4,000 produced $3,000. Interest on partner’s loan accounts was not entered this month.
During the month ended May 31, office furniture valued at $1,600 was sold for $1,000. Material costing $4,000 produced $3,200 and the balance of material was divided equally between the partners at cost. Plant equipment listed at $6,000 was sold for $6,200. A $200 note proved worthless and was charged off. Accounts receivable to the amount of $6,065 and notes receivable of $2,000 were collected in cash. Bad debts charged off $435. Expenses paid in cash $300. Interest was credited on Norton’s loan account $40 and Brown’s loan account $25.
Arrange your solution to show:
(a) Your method of obtaining the proper cash distribution.
(b) A statement showing each partner’s capital and loan at the end of each month, or a detailed capital and loan account for each partner with a balance entered in each account each month.
(c) A balance sheet at the close of the second month.
23. Walter Hopkins, while perfectly solvent and doing a profitable manufacturing business, had so tied up his capital in plant and materials that he was on the point of suspending for want of funds to pay for labor, and his creditors were preparing to commence legal proceedings to enforce a settlement. The condition of his affairs at this time was as follows:
Balance Sheet
| Assets | Liabilities | ||
| Plant | $25,198.00 | Creditors | $20,230.00 |
| Cash | 212.00 | Capital | 50,000.00 |
| Materials, Raw and Surplus | 4,900.00 | ||
| Partly Finished | 40,400.00 | ||
| Finished Goods | 6,070.00 | ||
| Accounts Receivable | 3,250.00 | ||
| $75,130.00 | $75,130.00 | ||