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Exam 12: Accounting for Partnerships

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Question 21

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Mace and Bowen are partners and share equally in income or loss.Mace's current capital balance is $135,000 and Bowen's is $120,000.Mace and Bowen agree to accept Kent with a 30% interest in the partnership.Kent invests $115,000 in the partnership.The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:

A) Mace $135,000;Bowen $120,000.
B) Mace $137,000;Bowen $122,000.
C) Mace $133,000;Bowen $118,000.
D) Mace $139,000;Bowen $120,000.
E) Mace $135,000;Bowen $124,000.

F) A) and B)
G) A) and C)

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Question 22

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Advantages of a partnership include:

A) Limited life.
B) Mutual agency.
C) Unlimited liability.
D) Co-ownership of property.
E) Voluntary association.

F) None of the above
G) B) and D)

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Question 23

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Lemon and Parks are partners.On October 1,Lemon's capital balance is $75,000,and Parks' capital balance is $125,000.With the partnership's approval,Parks sells ½ of his partnership interest to Tambling for $70,000.Prepare the journal entry to record this transaction in the partnership records.

__________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.

Henry,Luther,and Gage are dissolving their partnership.Their partnership agreement allocates each partner 1/3 of all income and losses.The current period's ending capital account balances are Henry,$45,000;Luther,$37,000;and Gage,$(5,000) .After all assets are sold and liabilities are paid,there is $77,000 in cash to be distributed.Gage is unable to pay the deficiency.What amount of cash will Gage receive upon liquidation?

Wallace,Simpson,and Prince are partners and share income and losses in a 3:4:3 ratio.The partnership's capital balances are Wallace,$68,000;Simpson,$90,000;and Prince,$42,000.Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000.The partnership would record the admission of Royal into the partnership as:

Glade,Marker,and Walters are partners with beginning-year capital balances of $100,000,$50,000,and $50,000,respectively.Partnership net income for the year is $84,000.Make the necessary journal entry to close Income Summary to the capital accounts if: a.Partners agree to divide income based on their beginning-year capital balances. b.Partners agree to divide income based on the ratio of 5:3:2 (Glade:Marker:Walters),respectively. c.Partnership agreement is silent as to division of income and less.

A partnership may allocate salary allowances to the partners reflecting the relative value of services provided.

On May 1,Gosworth and Jordan formed a partnership.Gosworth contributed cash of $100,000 and equipment valued at $142,000.Jordan contributed land valued at $130,000 and a building valued at $250,000.The partnership also assumed responsibility for Jordan's $120,000 long-term note payable associated with the land and building.The partners agreed to share income as follows: Gosworth is to receive a salary allowance of $38,000,both are to receive an annual interest allowance of 8% of their beginning-year capital investments,and any remaining income or loss is to be shared equally.During the year,Gosworth withdrew $40,000 and Jordan withdrew $42,000 cash.After the adjusting and closing entries are made to the revenue and expense accounts at the end of the year,the Income Summary account had a credit balance of $140,000.Prepare the journal entries to record (a)the partners' initial capital investments, (b)their cash withdrawals,and (c)closing of both the Withdrawals and Income Summary accounts.

If a partner withdraws from a partnership and the recorded value of his or her equity is overstated,then a bonus goes to _________________________;if the recorded value of the withdrawing partner's equity is understated,then a bonus goes to ____________________. answers must appear in this order

The following information is available on PDC Enterprises,a partnership,for the most recent fiscal year: There are three partners in TGR Enterprises: Pearson,Darling and Cathay.At the end of the year,the partners' capital accounts were in the ratio of 2:2:1,respectively.Compute the ending capital balances of Cathay.

Conklin plans to leave the CAP Partnership.The recorded value of his capital account is $48,000.The remaining partners Arthurs and Preston agree to pay Conklin $40,000 cash and Conklin accepts.The partners share income and loss equally.Prepare the general journal entry to record the withdrawal from the partnership.

In a partnership agreement,if the partners agreed to an interest allowance of 10% annually on each partner's investment,the interest allowance:

Darien and Hayden agree to accept Kevin into their partnership.Kevin will contribute $22,000 in cash.Prepare the journal entry to record this transaction.

Mutual agency means

In closing the accounts at the end of a period,the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

T.Andrews contributed $14,000 in to the T & B Partnership.The journal entry to record the transaction for the partnership is:

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

The Redtail Partnership agrees to dissolve.The cash balance after selling all assets and paying all liabilities is $60,000.The final capital account balances are: Paulson,$35,000;Gray,$29,000;and Chang, ($4,000).Chang is unable to pay the capital deficiency.Prepare the journal entries to record the transactions required to dissolve this partnership.

Olivia Greer is a partner in Made for You.An analysis of Greer's capital account indicates that during the most recent year,she withdrew $30,000 from the partnership.Her share of the partnership's net loss was $16,000 and she made an additional equity contribution of $10,000.Her capital account ended the year at $150,000.What was her capital balance at the beginning of the year?