Accounting Homework 2
Posted on October 16, 2011 by admin
Problem 2:
On March 21, 2006, the partnership that had been organized to operate the Lone Pine Café was dissolved under unusual circumstance, and in connection with its dissolution, preparation of a balance sheet became necessary.
The partnership was formed by Mr. and Mrs. Hendry Antoine and Mrs. Sandra Landers, who had become acquainted while working in a Portland, Oregon, restaurant. On November 1, 2005, each of the three partners contributed $16,000 cash to the partnership and agreed to share in the profits proportionally to their contributed capital (i.e., one-third each). The Antoine’s’ contribution represented practically all of their savings. Mrs. Landers’ payment was the proceeds of her late husband’s insurance policy.
On that day also the partnership signed a one-year lease to the Lone Pine Café, located in a nearby recreational area. The monthly rent on the café was $1,500. This facility attracted the partners in part because there were living accommodations on the floor above the restaurant. One room was occupied by the Antoine’s and another by Mrs. Landers.
The partners borrowed $21,000 from a local bank and used this plus $35,000 of partnership funds to buy out the previous operator of the café. Of this amount, $53,200 was for equipment and $2,800 was for the food and beverages then on hand. The partnership paid $1,428 for local operating licenses, good for one year beginning November 1, and paid $1,400 for a new cash register. The remainder of the $69,000 was deposited in a checking account.
Shortly after November 1, the partners opened the restaurant. Mr. Antoine was the cook, and Mrs. Antoine and Mrs. Landers waited on customers. Mrs. Antoine also ordered the food, beverages, and a supply, operated the cash register, and was responsible for the checking account.
The restaurant operated